Collins and Secretary, Department of Social Services (Social services second review) - [2022] AATA 3805

Collins and Secretary, Department of Social Services (Social services second review) [2022] AATA 3805 (14 November 2022)
Division:GENERAL DIVISION
File Number(s): 2022/0418
Re:Finbarr Collins
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

Decision
Tribunal:Mr S Evans, Member
Date:Heard on the papers
Date of decision: 14 November 2022
Place:Sydney

The reviewable decision dated 13 December 2021 is affirmed
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Mr S Evans, Member
Catchwords
SOCIAL SECURITY — Benefits — Family Tax Benefit—Where Applicant filed income tax returns out of time — Whether time can be extended beyond the following income year — Whether special circumstances exist that prevented Applicant making a claim within time — Whether non-lodgement of tax returns by accountant constitutes special circumstances — Decision under review affirmed.
Legislation
A New Tax (Family Assistance) Act 1999 (Cth)
A New Tax (Family Assistance) (Administration) Act 1999 (Cth)
Cases
Beadle and Director-General of Social Security (1984) 6 ALD 1
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Secretary, Department of Social Services and Hollis [2015] AATA 941
Nicholson and Secretary, Department of Social Services [2016] AATA 630
Mousawi and Secretary, Department of Social Services [2021] AATA 850
Massie and Department of Social Services (Social Services second Review) [2018] AATA 521
Secondary Materials
Family Assistance Guide 2022 (Version 1.241)
REASONS FOR DECISION
Mr S Evans, Member
14 November 2022

Finbarr Collins (the Applicant) seeks review of a decision of the Social Services and Child Support Division of the Tribunal (AAT1) affirming a decision of Services Australia (the Agency) not to pay a Family Tax Benefit (FTB) top-up payment for the 2019-20 financial year due to the late lodgement of he and his partner’s income tax returns (2019-20 tax returns).
Provision exists for top-up payments to be made following late lodgement of tax returns where special circumstances exist. The Applicant submits that special circumstances apply owing to COVID-19 and the Australian Taxation Office (ATO) extending the deadline for lodgement of 2019-20 tax returns. The Secretary of the Department of Social Services (the Secretary) does not agree.
For the reasons that follow, the reviewable decision will be affirmed.
Background and facts
The amount of FTB paid for a financial year is based on an income estimate. At the end of the financial year, the amount paid using the estimate is compared with the amount a recipient is entitled to, based on confirmed income. If the entitled amount is higher, a ‘top-up’ may be paid.[1]
[1] Family Assistance Guide 2022 (version 1.241), Part 6.4.1.30
The Applicant received a lump sum payment for FTB part A on 24 June 2020 for the period 1 July 2019 to 18 June 2020, followed by fortnightly payments for the remainder of the 2019-20 financial year.[2]
[2] T9/189
On 19 March 2021 the Agency wrote to the Applicant advising ‘you need to confirm your family income for 2019-20’. The letter stated in part:
You need to confirm your family income for the 2019-20 financial year. To do this you and your partner need to lodge your tax returns or you need to tell us you are not required to lodge, by 30 June 2021.
If you and your partner do not do this, you will have to pay back any Family Tax Benefit paid for the 2019-20 financial year. Your fortnightly Family Tax Benefit payments may also stop.
You may get top ups and supplement payments if your family income is confirmed by 30 June 2021.[3]
[3] T11/225
On 21 May 2021 the Agency again wrote to the Applicant reminding him to update his ‘family income estimate’ by 14 June 2021’. The correspondence advised the Applicant that he needed to lodge tax returns ‘in the timeframes advised by the Australian Taxation Office’. The correspondence also stated that should the Applicant and his partner not lodge their tax returns within 12 months of the end of the relevant financial year, he will ‘not be eligible to receive any additional Family Tax Benefit for the relevant year, including the Family Tax Benefit supplements’.[4]
[4] T11/229
On 24 May 2021 the Applicant was sent an SMS Message which read:
Urgent reminder - you and your partner need to lodge your 2019-20 tax returns or tell us you are not required to lodge by 30/6/2021. Act now or you may have to pay money back. Check the letter we sent about your family payments for more info. Do not reply by SMS.[5]
[5] ST1/234
On 8 June 2021 the Applicant was sent another SMS Message, which read:
Time is running out. You and your partner need to lodge your 2019-20 tax returns or tell us you are not required to lodge by 30/6/2021. Do not reply by SMS.[6]
[6] ST2/235
On 2 July 2021 the Applicant’s partner lodged her 2019-20 tax return[7] and on 23 August 2021 the Applicant did the same.[8]
[7] ST4/237
[8] ST3/236
On 24 August the Agency reconciled the Applicant’s FTB entitlement for the 2019-20 financial year and found that had the Applicant and his partner lodged their respective tax returns in time, the Applicant would have been entitled to receive an FTB top-up payment of $3,547.09.[9]
[9] T11/218
However, as the Applicant and his partner did not lodge their tax returns by 30 June 2021 (the due date) the top-up payment was deemed not to be payable.[10]
[10] T11/218
relevant LEGISLATION and policy
The legislation relevant to this application is contained in A New Tax System (Family Assistance) Act 1999 (Cth) (the FA Act) and A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the FA Admin Act).
A person is eligible for FTB if they have an FTB child in their care and is an Australian resident. A person’s rate of FTB is calculated by applying the Rate Calculator contained in section 58 of the FA Act. The calculation requires a person and their partner’s combined Adjusted Taxable Income to be taken into account when calculating the person’s rate of payment.[11]
[11] A New Tax System (Family Assistance) Act 1999 (Cth), Schedule 1 section 1(2)(b)
Reconciliation is the process of determining a person’s eligibility for FTB and other payments. It also determines a person’s correct rate of payment for the relevant income year. The reconciliation time is the time after the end of the financial year when the person lodges a tax return or notify the Agency that they are not required to lodge a tax return for their Adjusted Taxable Income for that financial year.[12] Sections 32C and 32D of the FA Administration Act provide that individuals must lodge their tax returns before the end of the first financial year after the relevant income year.
[12] A New Tax (Family Assistance) (Administration) Act 1999 (Cth), subsection 32C(3)
Section 32C of the FA Admin Act provides:
32C Relevant reconciliation time—first individual must lodge tax return
(1) This section applies to the first individual for a same‑rate benefit period if:
(a) the first individual is or was required to lodge an income tax return for the relevant income year; and
(b) clause 38L of Schedule 1 to the Family Assistance Act did not apply to the first individual at any time during the same‑rate benefit period.
(2) Disregard paragraph (1)(b) if the first individual was a member of a couple at any time during the same‑rate benefit period.
(3) The relevant reconciliation time is the time when an assessment is made under the Income Tax Assessment Act 1936 of the first individual’s taxable income for the relevant income year, so long as the first individual’s income tax return for the relevant income year was lodged before the end of:
(a) the first income year after the relevant income year; or
(b) such further period (if any) as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the first individual from lodging the return before the end of that first income year.
(4) The further period under paragraph (3)(b) must end no later than the end of the second income year after the relevant income year.
Section 32D of the FA Administration Act provides that where a person is a member of a couple their partner must similarly lodge a tax return for the relevant income year:
32D Relevant reconciliation time—no separation of couple and partner must lodge tax return
(1) This section applies to the first individual for a same‑rate benefit period if:
(a) the first individual was a member of a couple throughout that period; and
(b) the other member of the couple (the partner) is or was required to lodge an income tax return for the relevant income year; and
(c) the first individual continues to be a member of the couple until the end of:
(i) the first income year after the relevant income year; or
(ii) such further period (if any) as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the partner from lodging the return before the end of that first income year.
(2) The relevant reconciliation time is the time when an assessment is made under the Income Tax Assessment Act 1936 of the partner’s taxable income for the relevant income year, so long as the partner’s income tax return for the relevant income year was lodged before the end of:
(a) the first income year after the relevant income year; or
(b) such further period (if any) as the Secretary allows under subparagraph (1)(c)(ii).
(3) The further period under subparagraph (1)(c)(ii) must end no later than the end of the second income year after the relevant income year.
Departmental policy is provided in the Family Assistance Guide 2022 (the Guide). The Tribunal will usually apply departmental policy unless there are cogent reasons not to do so.[13]
[13] ReMassie and Department of Social Services (Social Services second Review) [2018] AATA 521, [23]
The Applicant’s position
In a written submission the Applicant explains that the ‘exceptional events’ of the COVID-19 pandemic and associated lockdowns led to a ‘tumultuous period of financial uncertainty’ for his household. He argues it is appropriate for the Tribunal to apply the special circumstances provisions which would allow for an extension in lodging he and his partner’s 2019-20 tax returns so that he might receive the top-up payment.[14]
[14] Applicant’s Undated Statement, pg. 1
The Applicant has provided correspondence dated 5 October 2021 from chartered accountants Walker Wayland Services Pty Ltd (WWS), who have acted as the Applicant’s tax agent since 2009. The correspondence confirms the Applicant provided information relating to his 2020 tax return in ‘late April 2021’. Following review of the initial documents, his accountants requested further information in ‘June 2021’. The Applicant’s tax return was subsequently lodged in August 2021.[15]
[15] T6/152
The letter from his accountant also confirms the deadline for lodgement of 2019-20 tax returns was extended from 17 May 2021 under the tax agent lodgement program ‘by the ATO for individuals affected by the … lockdown in the greater Sydney area’.[16] The Applicant argues that the lodgement of he and his partner’s tax returns was consistent with the extended deadline provided by the ATO.[17]
[16] T6/152
[17] Applicant’s Undated Statement, pg. 1
ISSUE to be determined
Sections 32C and 32D of the FA Admin Act provide that the Applicant and his partner’s 2019-20 tax returns should be lodged before the end of the first income year after the relevant income year, which in this case is 30 June 2021. It is not in dispute that the Applicant and his partner’s tax returns for the 2019-20 income year were submitted after this date.
Paragraphs 32C(3)(b) and 32D(2)(b) of the FA Admin Act provide that the reconciliation time may be extended for a further period as the Secretary allows, if the Secretary - or the Tribunal standing in the shoes of the Secretary - is satisfied there are special circumstances preventing the first individual and their partner from lodging their returns before the end of the first income year.
As such, the Tribunal must determine whether special circumstances exist which prevented the Applicant and his partner from lodging their tax returns by the due date and whether the reconciliation time should be extended to 23 August 2021.
Consideration
The term ‘special circumstances’ is not defined in the relevant legislation but guidance can be found in Federal Court decisions and previous decisions of the Tribunal. In Beadle and Director-General of Social Security[18], the Tribunal stated that:
An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.[19]
[18] (1984) 6 ALD 1
[19] Beadle and Director-General of Social Security (1984) 6 ALD 1, 3
In Angelakos v Secretary, Department of Employment and Workplace Relations[20] the Federal Court emphasised that it is not the intention of Parliament that the exercise of the discretion be confined to the ‘exceptional’ case, but there needs to be something that distinguishes the case from the ordinary or usual case. [21] As such, for discretion to be exercised on the basis of special circumstances, there must be some factors which distinguish the case and set it apart from other similar cases.
[20] [2007] FCA 25
[21] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, [33]
In considering the exercise of discretion due to special circumstances for extending the reconciliation time, the Tribunal has previously held that it ‘must be satisfied of two things: first, that circumstances existed that were special, and secondly, that those circumstances prevented the claimant from making her claim within time’.[22]
[22] Secretary, Department of Social Services and Hollis [2015] AATA 941, [31]
In his application for internal review by the Agency dated 8 September 2021, the Applicant wrote that the pandemic ‘disrupted workflow timelines’.[23] He submits that ‘all due diligence and care was deployed’ in order to lodge his tax return by the due date. He maintains that he complied with the advice he received from his tax agent who had also notified him of the ATO’s extension of time for lodgement.[24]
[23] T5/160
[24] T1/2
The Applicant’s contention to have sought to lodge his tax return by the due date is supported by his accountant’s correspondence confirming he provided information to complete his tax return in April 2021. A request for further information from the Applicant was made by his accountant in June. His accountant’s delay in seeking further information from the Applicant appears to support his observation that the pandemic ‘disrupted workflow timelines’.[25]
[25] T6/152
In relation to the ATO extending the deadline for the 2019-20 income year under the Tax Agent Program for individuals impacted by the lockdown, the Secretary notes that the ATO Practice Statement Law Administration 2011/15 item 47 (the practice statement) states:
We generally consider it fair and reasonable to grant a deferral to entities where the inability to lodge by the due date is reasonably attributed to exceptional or unforeseen circumstances.[26]
[26] Respondent’s Statement if Facts, Issues and Contentions dated 6 June 2022, [42]
However, the Secretary submits that the requirement in the practice statement that the late lodgement of tax returns be reasonably attributed to the circumstances which existed is a significantly lower threshold than the requirement in the FA Admin Act that special circumstances prevented lodgement. I accept the Secretary’s contention that the more stringent standard set out in the FA Admin Act should apply when considering if the 12-month timeframe for lodgement of tax returns should be extended.[27]
[27] Respondent’s Statement if Facts, Issues and Contentions dated 6 June 2022, [43]
The Secretary contends that the lodgement of tax returns is the individual’s responsibility.[28] Instruction 6.4.3 of the Guide provides that late lodgement or delay due to high workloads would not ordinarily constitute special circumstances:
Lodgements of tax returns are the responsibility of the individual, including those who lodge via a tax agent. Providing financial statements to a tax agent or accountant prior to 30 June of the relevant lodgement year does not constitute lodgement of tax returns for FTB purposes. Extensions to the lodgement period may be granted if there are special circumstances, which prevent the individual from meeting their income confirmation obligations. A tax lodgement deferral granted by the ATO does not automatically guarantee that a special circumstances extension will be granted. Special circumstances are circumstances that are unusual, uncommon or exceptional. Failure by an accountant or tax agent to lodge a tax return within the lodgement period (e.g. forgetting to lodge in time or delay due to high workloads) will not ordinarily constitute special circumstances.
[28] Respondent’s Statement if Facts, Issues and Contentions dated 6 June 2022, [47]
This Tribunal has previously accepted that it is the individual’s responsibility to ensure their tax returns are submitted on time. In Nicholson and Secretary, Department of Social Services[29] the Tribunal observed:
The law is clear that a taxpayer cannot rely on blaming an accountant for not lodging returns on time or for misplacing documents or for not telling the taxpayer of changes to the law or reminding them to put in the necessary documents and rely on this as unusual, uncommon or exceptional circumstances. Unfortunately, these types of issues arise not infrequently.[30]
[29] [2016] AATA 630
[30] Nicholson and Secretary, Department of Social Services [2016] AATA 630, [54]
In considering whether special circumstances exist, I take into account the Secretary’s submission that it was open to the Applicant to lodge his tax return himself using the information he provided to his accountants in April 2021.[31] It is unclear what further information the Applicant subsequently provided in June, but the sum of the evidence indicates that the information required to lodge the tax return was available to the Applicant before the due date.
[31] Respondent’s Statement if Facts, Issues and Contentions dated 6 June 2022, [66]
I also have regard to the fact that the late lodgement occurred in the context of the Applicant having received four separate reminders to submit his tax return prior to the due date for FTB purposes. It is also the case that the Applicant and his partner were required to lodge their tax returns one year after the end of the 2019-20 financial year.
To my mind these factors do not support the Applicant’s argument that the disruptions caused by COVID-19 constitute special circumstances. It is also the case that unless there is something ‘out of the ordinary’ about how the Applicant had been affected, COVID-19 in and of itself cannot be a sufficient ground to claim that special circumstances apply.[32] Consequentially, whilst I accept that the pandemic and associated ‘lockdowns’ contributed to disruption of ‘workflow timelines’, based on the evidence I do not accept that they support a finding that special circumstances existed. Further, I am not satisfied that the circumstances which existed prevented the Applicant lodging his tax return by the due date.
[32] Mousawi and Secretary, Department of Social Services [2021] AATA 850, [95]
For these reasons, the reviewable decision will be affirmed.
Decision

The reviewable decision dated 13 December 2021 is affirmed.

I certify that the preceding 38 (thirty -eight) paragraphs are a true copy of the reasons for the decision herein of Mr S Evans, Member

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Associate
Dated: 14 November 2022

Date of hearing: Heard on the papers

Applicant: In person

Solicitors for the Respondent: Thina Balakisnan

Date of hearing:	Heard on the papers
Applicant:	In person
Solicitors for the Respondent:	Thina Balakisnan