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

[2021] AATA 4678

Close and Secretary, Department of Social Services (Social services second review) [2021] AATA 4678 (17 December 2021)

Division:General Division

File Number:           2020/5349

Re: Traci Close

APPLICANT

Secretary, Department of Social ServicesAnd  

RESPONDENT

DECISION

Tribunal:Member K. Parker 

Date:17 December 2021

Place:Melbourne

The Tribunal affirms the Decision Under Review.

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

Member K. Parker

CATCHWORDS

SOCIAL SECURITY – carer payment – overpayments – debt raised – whether debt owed to the Commonwealth – whether debt should be waived or written off – whether portion or all of the debt has arisen due to sole administrative error of the Commonwealth – whether “special circumstances” exist – failure to declare increases in partner’s income and to declare gross income – Applicant declared annual income for the purpose of Family Tax Benefits (FTB) – whether the debtor has capacity to repay the debt – deductions from FBT payments – Decision Under Review affirmed

LEGISLATION

Social Security Act 1991 (Cth)

Social Security (Administration) Act 1999 (Cth)

REASONS FOR DECISION

Member K. Parker

17 December 2021

1. The Applicant, Ms Traci Close, seeks review of a decision by the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) dated 20 July 2020 (Decision Under Review), concerning a debt raised by the Commonwealth against her in respect of overpayments of carer payments (CP) in the sum of $29,698.10 (Debt) relating to the period 7 December 2011 to 16 April 2019 (Debt Period).

2. Ms Close received CP from 2008 until 16 April 2019. The CP was paid to Ms Close based on information provided by her to the Department of Social Services about (among other things) her income and her partner’s income. During the Debt Period, Ms Close did not disclose to the Department the full extent of the gross income earned by her partner.

3. It was not until 19 March 2019 that the Department obtained information about her partner’s income directly from his employer. Based on that information, it was apparent that payments for CP made to Ms Close were more than the rate of payment of CP to which she was entitled, based on the revised combined income of her and her partner. Accordingly, the Department raised the Debt against Ms Close and she was advised in writing on 13 May 2019.

4. Ms Close considers that the Debt should be waived or written off because over the Debt Period, Ms Close had declared her partner’s increasing income for the purpose of family tax benefit (FTB), under a mistaken belief that it would also be taken into account for the purpose of calculating her CP.

   ISSUES

5. The issues arising in this application are whether the Debt should have been raised against Ms Close and if so, whether it is appropriate for the Debt, in part or in full, to be written off or waived, after taking into consideration the circumstances of this case.

   BACKGROUND AND LEGISLATIVE FRAMEWORK

6. The rate of CP paid to a person entitled to receive CP is set out in s 210 of the Social Security Act 1991 (Cth) (SS Act) and is worked out in accordance with a Rate Calculator in s 1064 of the SS Act. The rate of CP will vary depending on whether the person is single or a member of a couple. When applying the income test, a person who is a member of a couple is taken as sharing their income and assets with their partner on a 50/50 basis. The income test is prescribed in s 1064-E1 of the SS Act. Under this income test, Ms Close’s income and any income from her partner are both factored into the calculation of her rate of CP.

7. The Department lodged a document with the Tribunal showing in detail the calculation of the Debt. Ms Close did not dispute those calculations at the hearing and instead, her contentions focussed on why the Debt should be written off and/or waived.

8. Section 1223(1) of the SS Act provides that any payment made to a person in excess of their entitlement to a social security payment constitutes a debt owed to the Commonwealth which is recoverable.

9. Based on the calculations provided by the Respondent, the Tribunal is satisfied that Ms Close was overpaid CP during the Debt Period and that the Debt of $29,698.10 was properly raised against her.

10. Ms Close contends that it took Centrelink ten years to tell her that she owed the money when it could have been resolved if they were chased up about it from the start. Ms Close also said she was not aware that the income amount to be declared was the before-tax amount, and not the after-tax amount. Ms Close explained in an email dated 2 September 2020 that she and her partner had “no money and this is going to wreck us if we have to pay it back as we are dealing with many health issues”. Ms Close states that it was “an honest mistake”. She stated they were not out to “rort the system” and are “not like that”.

11. Ms Close attended the hearing of this application with her husband and gave evidence as follows:

    (a)Fortnightly deductions of $90 were currently being taken from her FTB payments to repay the Debt. After this deduction, Ms Close receives $231 per fortnight in FTB payments. Ms Close said she made a claim for disability support pension (DSP), but her claim was rejected and at the time of the hearing, she was not in receipt of the DSP or any other social security payments. Ms Close said that once she paid for her medication, there was no money remaining from her FTB payments;

    (b)Ms Close’s husband is still employed, and his gross income is $1,132 per week;

    (c)Her two children aged 19 and 15 are still living at home. She said her 19-year-old-child was a person with disabilities and was trying to claim the DSP. Ms Close said that her 15-year-old-child was on Jobseeker and “they are referring to get her on the disability pension”; and

    (d)Ms Close does not own her home.

12. Mr Close was permitted to make submissions on behalf of Ms Close. He said there was a misunderstanding in 2011 between the meaning of “gross” and “net” income. He said they were doing the right thing. He said they were not trying to defraud the system. He said that things had been low for them for a long time. He raised concerns that Ms Close had been fighting Centrelink for many years to try to get the DSP and she had been told she does not qualify even though she had to go to hospital, and even though he considered that they had produced the information. The Tribunal acknowledges Mr and Mrs Close’s frustration, but their concerns about applying for the DSP are irrelevant to the decision the Tribunal is required to make in this application, save for the Tribunal considering Ms Close’s medical conditions as part of assessing whether there are special circumstances in this case, as dealt with below.

    CONSIDERATION

13. Firstly, the Tribunal will consider whether s 1237A of the SS Act applies in this case. This provision requires that the right of the Respondent to recover a debt, or any proportion of it, must be waived if it is attributable solely to an administrative error made by the Commonwealth, provided that the debtor received the payment in good faith. There is a notation to this section which states that this provision does not allow the waiver of a part of a debt that was caused partly by administrative error and partly by one or more factors (such as an error made by the debtor).

14. The Respondent contends that there was no sole administrative error on the part of the Commonwealth in this case and that the error arose due to Ms Close’s “failure not to advise increases in her partner’s income from time to time” and that this failure was “not corrected by her advising annual income estimates for the purposes of family tax benefit payments”.[1]

    [1] Refer [37] and [38] of the Respondent’s Statement of Facts, Issues and Contentions (SFIC).

15. The Tribunal notes the evidence given by Ms Close at the AAT1 hearing, including that she suffered from Crohn’s disease, anxiety and depression and was receiving treatment from a rheumatologist, psychologist, general practitioner and through the Irritable Bowel Clinic. Ms Close reported that she had problems with her memory and that when her Crohn’s disease flares up, she experiences severe pain requiring her attendance at the hospital.

16. At the hearing of this application, Ms Close informed the Tribunal that her 19-year-old child had eye issues, Attention Deficit Hyperactivity Disorder (ADHD) and anxiety, and her 15-year-old child was in good health. She said she also had a 26-year-old daughter with post-natal depression and ADHD. Ms Close expressed concerns about not being able to receive DSP from Centrelink and that she had to struggle to pay every bill.

17. Ms Close’s evidence during the AAT1 hearing was that she was unable to afford private health insurance and that she was required to meet the costs of her medical tests and medication. Ms Close’s evidence was that she was unable to work due to her condition. Ms Close lives in rental accommodation with her husband, who continues to work, and her two teenage children. Their family tried to buy a car in February 2020, but Ms Close reports that they had to return it to the dealership, as they could not keep up with the payments.

18. The Tribunal notes the Centrelink record of a discussion which took place on 31 May 2019 between a Centrelink employee and Ms Close.[2] It was recorded that Ms Close advised that she had telephoned Centrelink each tax year to seek help with updating the FTB estimate and that Ms Close thought this estimate was used for all her payments.

    [2] Refer page 254 of the T-Documents.

19. It was recorded that the Centrelink employee asked Ms Close about whether she read her pension letters to ascertain if her details in them were correct. It was recorded that Ms Close responded that she generally read the first page to see what she was getting paid and had not checked the other pages. This was consistent with Ms Close’s evidence at the hearing of this application.

20. The Tribunal notes that notices were sent to Ms Close from time to time specifying details of her total combined income for the purpose of CP.

21. Specifically, the Tribunal notes the letter dated 24 November 2011 which states on the first page, immediately under the dollar figure provided for the CP and Pension Supplement:

    INFORMATION USED FOR CALCULATING YOUR REGULAR PAYMENT

    Combined Regular Fortnightly Earnings…………………………$1,487.57

22. On the back of this letter, it states:

    WHAT YOU MUST TELL US

    You must tell us within 14 days (28 days if living outside Australia) if any of the changes listed below happen or are likely to happen to you and/or your partner:

    Income: gross income received or changes including, but not limited to:

    Earnings: …employment income from an employer or self-employment…

    …

    How to tell us

    You can tell us about these changes by calling Centrelink 13 27 17 or by visiting any of our Centrelink Customer Service Centres.

    Not telling us or giving false or misleading information is a serious offence

    If you are not sure about the information you need to provide, please contact us as soon as possible.

23. Centrelink sent other correspondence to Ms Close relevant to either her CP or FTB payments, again providing references to the income information held by Centrelink and which included prompts to Ms Close to update the information if it was incorrect:

    (a)7 May 2013 which has the heading “Updating your income estimate for the 2013-2014 financial year”.  This letter invites Ms Close to update her “family income estimate” to determine whether she is eligible for an additional lump sum supplementary payment of FTB and to avoid being overpaid FTB and/or Child Care Benefit. On the second page of this letter, it sets out a process to follow to submit the annual family income estimate, either by providing an estimate online or by calling 136 150; or by using the income estimate that has been calculated using her current income estimate and increasing it in line with changes in Australian Average Weekly Earnings;

    (b)29 April 2014 which has the heading “Update your income estimate for the 2014-2015 financial year”. This takes a similar form to the letter referred to in the above subparagraph. At the end of the Option 1 section, the letter states: “If these estimates are accurate, you do not need to do anything. We will start using these estimates from 1 July 2014 to calculate your Family Tax Benefit”;

    (c)12 June 2015 headed “Income Statement” which records information held by Centrelink on Ms Close’s Centrelink record. This Income Statement lists all previous and future regular social security entitlements and payments including CP, Carer Allowance, Energy Supplement, Pension Supplement, FTB Part A, FTB Part B and Rental Assistance. At the bottom of the second page of this Income Statement, the following appears:

    Details of your Income (Not including Centrelink payments)

    There are no income details to report.

    (d)12 June 2015 headed “Your Centrelink Statement for Carer Payment” which states at the very top of this letter:

    Please check the information on this statement carefully. If the details on this statement are correct there is no need for you to contact us. If your circumstances have changed, please contact us within 14 days. This request is an information notice given under the social security laws. You may find it convenient to keep this statement for your records.

    Rate of payment – Your future rate of payment may change depending on the amount of your earnings, other income and assets. We have not shown family assistance payments. Note that all the information in this statement is from records we hold as at the issue date of this statement.

    Regular rate of payment from 18 June 2015

    …

    Total: $301.51

    Note: Your Carer Payment is currently paid under the income test.

    …

    Earnings information – You need to tell us your earnings before tax and other deductions such as salary sacrifice. The amount must be for work performed in the Centrelink fortnight prior to notification and only the amount earned in the Centrelink fortnight, this may be different from your salary pay fortnight.

    Partner earnings

    Centrelink period   Amount

    21 March 2015 to 12 Jun 2015            $1,487.57 pf

    Note: Your partner earnings shown above may be different from what you told us about if we have received newer information. Amounts shown are fortnightly.

    Other details

    Family Tax Benefit estimate

    Date last updated         Amount advised   For financial year

    (combined taxable income)

    1 Jul 2014  $84,899 pa  2014/2015

    If you would like to update your estimate you can go to our website humanservices.gov.au or call our self service line on 136 240” or call us on 136 150.

    (e)9 February 2016, 4 March 2016, 1 September 2017, and 12 October 2018 Income Statements, stating that there were no income details to report;

    (f)4 March 2016 Centrelink Statement for Carer Payment, recording that Ms Close’s partner’s earnings for the Centrelink period 12 Dec 2015 to 4 Mar 2016 was $1,487.57 per fortnight and that the FTB estimate based on “amount advised (combined taxable income)” was $86,004 per annum for the 2015/2016 financial year;

    (g)1 September 2017 Centrelink Statement for Carer Payment, recording Ms Close’s partner’s earnings in the period 10 Jun 2017 to 1 Sep 2017 as $1,487.57 per fortnight, and that the FTB estimate of “amount advised (combined taxable income)” as $88,693 per annum;

    (h)7 October 2018 Centrelink Statement for Carer Payment recording Ms Close’s partner’s earnings in the period 16 Jul 2018 to 7 Oct 2018 as $1,487.57 per fortnight and the FTB estimate based on “amount advised (combined taxable income)” of $90,823 for the 2018/2019 financial year.

24. The Tribunal has considered the correspondence sent to Ms Close over the Debt Period and the information about her partner’s income that Centrelink used to calculate her rate of CP. The Tribunal considers that this correspondence made it clear that FTB and CP were different types of social security payments. The Tribunal considers that when Ms Close received the letter on 24 November 2011, she was clearly advised that Centrelink had recorded her partner’s income as $1,487.57 per fortnight as at that date. Ms Close subsequently received letters including in 2016, 2017 and 2018 as set out above, recording her partner’s income as being $1,487.57 per fortnight. If Ms Close had read this information on the letter, it would have been clear to her that she needed to update his earnings amount for the purpose of enabling Centrelink to correctly calculate the rate of her CP, as her husband’s salary did not remain the same between 2011 and 2019. His income increased and Ms Close was also aware that Mr Close was, at times, working overtime which added to his income.

25. Ms Close gave evidence that she does not completely read the Centrelink letters that she receives and that she only looks to see the amount at the top of the letter showing what she will be paid. The Tribunal accepts that Ms Close does not read the remaining parts of the letters. However, the Tribunal notes that clear instructions are given on those letters to read them carefully and requesting that the recipient contact Centrelink to update the income and other information on them if that information has changed.  The fact that Ms Close failed to read the letters relating to her CP payments and failed to update the income information, and Ms Close’s misunderstanding that her husband’s gross income, instead of his net income, should have been quoted, are both errors on Ms Close’s part (and are not errors on the part of the Commonwealth), which have resulted in the overpayments of CP being made.

26. Accordingly, the Tribunal concludes that no portion of the overpayments of CP were made, and no portion of the Debt has arisen, due to a sole administrative error by the Commonwealth. For this reason, the Tribunal concludes that s 1237A of the SS Act does not apply in the circumstances of Ms Close’s case and there is no requirement under this provision for the Tribunal to waive the right of the Commonwealth to recover any portion of the Debt.

27. Secondly, the Tribunal will consider whether the Tribunal’s discretion to waive all or part of the Debt was enlivened under s 1237AAD of the SS Act. Such discretion will be enlivened under this provision if there were “special circumstances (other than financial hardship alone) that make it desirable to waive” all or part of the Debt, and it is more appropriate to waive than to write off the Debt or part of it. It is also necessary to establish that the Debt did not result wholly or partly from the debtor or another person knowingly making a false statement or a false representation or failing or omitting to comply with a provision of the SS Act or the Social Security (Administration) Act 1999 (Cth) or the Social Security Act 1947 (Cth).

28. Dealing with the last of those requirements, there was no clear evidence in this case that Ms Close had tried to mislead the Commonwealth and in fact, Ms Close had sought to provide income estimates each year for the purpose of the calculation of FTB payments. The Tribunal accepts Ms Close’s evidence that she misunderstood that this information would also be applied to the calculation of her CP.

29. The Tribunal must consider whether “special circumstances” exist in this case. The Tribunal heard evidence from Mr and Mrs Close to the effect that their family was struggling financially to pay the bills and needed to relinquish their new car due to their financial position. Mr and Mrs Close have two dependants, both reported to have medical conditions of their own and they are not employed. Ms Close is not employed due to her medical conditions. However, there is at least one full time wage being received by the family through the employment of Mr Close and that at times, he can work overtime to receive additional income. There are social security payments being received by Ms Close to supplement the Close family’s income. The Tribunal does not doubt that the Close family does not find it easy to meet the day-to-day expenses of a four-person household on their combined family income, but the Tribunal is not satisfied that the financial position of the Close family places them into the category of experiencing financial hardship. The Tribunal notes that Mr Close’s employment and stream of income is stable, and they can rely on the continuation of his source of income to financially support the family.

1. The Tribunal has also considered the difficulties that have been experienced by Ms Close on account of her own medical conditions and those of her children. In cases like this, involving issues about the payment of CP, inherently members of the family have medical conditions giving rise for the need to provide care to those persons. As challenging as that may be, those circumstances are not “special” and are commonplace in these types of CP debt cases.

2. Ms Close considers that Centrelink should have identified the problem much earlier than they did and fixed the issue from the start of the Debt Period. The Tribunal does not agree with Ms Close in this regard and instead considers that she should have exercised more care in reading important Centrelink correspondence received by her and that she should have corrected, and continuously updated, the income information she was notified was being used to calculate her CP payments.

3. Considering all these matters, the Tribunal is not satisfied that “special circumstances” exist in this case. For this reason, the Tribunal concludes that discretion is not enlivened under s 1237AAD of the SS Act to waive all or part of the Debt.

4. Thirdly, the Tribunal must consider whether discretion to write off the Debt under s 1236 of the SS Act is enlivened in the circumstances of this case. This discretion is enlivened, relevantly, if the Tribunal finds that the debtor has no capacity to repay the debt, or it is not cost effective for the Commonwealth to take action to recover the debt. Subsection 1236(1C) of the SS Act provides that a debtor is taken to have a capacity to repay the debt if the debt is recoverable by means of deductions from the debtor’s social security payment, unless recovery by those means would result in the debtor being in severe financial hardship.

5. The Tribunal concludes that subsection 1236(1C) applies to Ms Close in that the Debt is being repaid by way of $90 fortnightly instalments being deducted from her FTB payments. Ms Close states that once those instalments are paid, and after she pays for her medications, she has no money left from her FTB payments. There was no evidence before the Tribunal showing the extent of any regular payments for medication. Even if the Tribunal were to accept Ms Close’s evidence in this regard, which the Tribunal will do for present purposes, Ms Close and her children are still able to rely upon the stable income earned by Mr Close to support their living expenses. The Tribunal accepts the Close family’s finances are tight but is not satisfied that Ms Close experiences “severe financial hardship” as a result of the current deductions being taken from her FTB payments.

6. As a result, the Tribunal concludes that Ms Close is taken to have a capacity to repay the Debt by operation of s 1236(1C) of the SS Act and as such, the discretion to write off the debt is not enlivened because none of the circumstances in s 1236(1A) of the SS Act apply in Ms Close’s case.

   CONCLUSION

7. The Tribunal concludes that:

   (a)the Debt was properly raised by the Commonwealth due to overpayments made to Ms Close in respect of CP in the sum of $29,698.10;

   (b)there is no requirement under s 1237A of the SS Act to waive the Commonwealth’s right to recover the Debt or any part of it because it was not attributable to a sole administrative error on the part of the Commonwealth;

   (c)no discretion was enlivened to waive the debt under s 1237AAD of the SS Act because the Tribunal has found that special circumstances do not exist in this case; and

   (d)no discretion was enlivened to write off the debt under s 1236 of the SS Act because Ms Close is taken to have a capacity to repay the Debt.

8. Accordingly, the Tribunal affirms the Decision Under Review. This means that the Debt raised against Ms Close stands and the outstanding balance of the Debt must be repaid by Ms Close.

9. Ms Close has raised concerns about the financial impact of her paying the $90 per fortnight instalments to repay this Debt. At the hearing, the Tribunal indicated to Ms Close that she may wish to consider applying to Centrelink to have the quantum of fortnightly instalments reduced, to lessen the financial impact on her and her family.

I certify that the preceding 38 (thirty-eight) paragraphs are a true copy of the reasons for the decision herein of Member K. Parker.

......................[Sgd]..........................

Associate

Dated: 17 December 2021

Date of hearing:	9 July 2021
Representative for the Applicant:	Self-represented
Advocate for the Respondent:	Mr Brian Sparkes
Solicitors for the Respondent:	Services Australia

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