Cutting and Department of Family and Community Services

[2000] AATA 414

DECISION AND REASONS FOR DECISION [2000] AATA 414

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N1999/863

GENERAL ADMINISTRATIVE  DIVISION       )          
           Re      KAREN CUTTING
  Applicant
           And    DEPARTMENT OF FAMILY AND COMMUNITY SERVICES           
  Respondent

DECISION

Tribunal       Dr J Campbell (Member)   

Date29 May 2000 

PlaceSydney

Decision      The Tribunal affirms the decision under review.

(Sgd) Dr J Campbell
  ……….………………………
  MemberCATCHWORDS
SOCIAL SECURITY – Family Payment – notifiable event – estimate – income free area – income for base tax year – excess family payment – debt – administrative error – waiver – special circumstances
Social Security Act 1991, sections 6(1) 885, 891, Module H of section 1069, 1223(3), 1236(1A), 1237A(1) and 1237AAD.
Re Beadle and Director General Social Security (1984) 6 ALD 1

REASONS FOR DECISION

Dr J Campbell (Member)               

1. Ms Karen Cutting ("the Applicant") in this matter seeks a review of the decision dated 27 May 1999 of the Social Security Appeals Tribunal which affirmed the decision dated 11 March 1999 of an authorised review officer of Centrelink. This latter decision affirmed a decision dated 6 February 1999 taken by a delegate of the Secretary, Department of Family and Community Services ("the Respondent") to raise and recover from the Applicant a debt arising from overpayment of family payment.

2. A hearing was held before the Tribunal on 14 January 2000 at which the Applicant was self-represented and at which she gave evidence. The Respondent was represented by Ms A Smith, an advocate from the Administrative Law section of Centrelink.

3. The following written material was place in evidence before the Tribunal
   Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 T1-12 P1-51
   Applicant's taxation assessment for financial year 1996/97     Exhibit A1     
   Debt determination and submission dated 28 August 1999     Exhibit R1     
   Respondent's statement of facts and contentions dated 22 October 1999   Exhibit R2     
   Letter from Centrelink to Applicant dated 10 January 2000 (enclosing copy of letter dated 11 February 1997)        Exhibit R3     

Issues

1. The relevant issues between the parties in the matter are:

   (i)        whether the decision to raise and recover a debt of family payment amounting to $4890.96 (Exhibit R1) for the period 3 July 1997 to 22 October 1998 was correct; and

   (ii)       whether there is any basis for non-recovery of all or part of the debt.

Legislation

1. The relevant legislation in this matter is the Social Security Act 1991 ("the Act") and in particular sections 6(1), 885, 891, Module H of section 1069, 1223(3), 1236(1A), 1237A(1) and 1237 AAD.
   Background

2. The Applicant in this matter was in receipt of sole parent pension and family payment for herself and three children. On 11 February 1997 the Applicant was advised that her rate of payment would be $423 per fortnight. As part of the advice the Applicant was told that she must advise the Respondent within 14 days if she were to start work or change jobs or recommence work and her income was to be more than $27,057.80 in the 1995/96 or 1996/97 financial years. Further the Applicant was to advise her Respondent if one of the dependants stops living with her (Exhibit R3).

3. In May 1997 the Applicant commenced training at the Police Academy at Goulburn. On 13 June 1997 the Applicant provided an estimate of income for the financial year 1997/98 of $25,165 (T11, p34). On 21 July 1997 the Applicant was advised that she would be paid at $423 per fortnight and that she was to notify the Respondent if her income for financial year 1997/98 would be greater than $27,057.80 (T4) in either financial year 1996/97 or 1997/98.

4. In September 1997 the Applicant's son went to live with his father and the Respondent advised the Applicant that her fortnightly payment would be $331.40 and that the Applicant was to advise the Respondent if her income for either financial year 1996/97 or 1997/98 was to exceed $10,057.80 (T5).

5. On 20 October 1997 the Applicant completed a review form for family payment in which she declared her actual taxable income for financial year 1996/97 as $20,677 (T9).

6. On 18 October 1998 a further annual review form was completed by the Applicant in which she advised that her actual taxable income for financial year 1997/98 was $37,514 (T7).

7. As a result of the actual taxable income for financial year 1997/98, the Respondent considered an overpayment to have been made, and after consideration sought to review the overpayment as a debt due and payable by the Applicant for the period 3 July 1997 to 22 October 1998. Subsequent reviews were undertaken on 17 February 1999, by an authorised review officer on 1 March 1999 and by the Social Security Appeals Tribunal on 27 May 1999. Each of the reviews affirmed the primary decision of 5 February 1999.
   Applicant's Evidence

8. In general introduction, the Applicant told the Tribunal that she was born in October 1964, was married with three children and separated four years ago (1995), with the eldest child (age 15) moving to live with his father in September 1997. After her separation, the Applicant worked part-time as a barmaid while attending TAFE in 1995, and from March 1996 as a barmaid before entering the Police Academy in Goulburn in May 1997 for a six month course. After graduation in November 1997, the Applicant was posted as a probationary constable to Penrith, with an appropriate increase in salary. The Applicant also stated that her father died intestate during financial year 1996/97 and she received his life policy proceeds which she found to be taxable income for the financial year 1997/98.

9. In detailing her financial circumstances the Applicant stated that her actual taxable income for financial year 1995/96 was $9138, for financial year 1996/97 was $20,627, and for financial year 1997/98 was $37,574, with her income in 1996/97 reflecting her barmaid and police work activities and the 1997/98 reflecting her police recruitment training and probationary constable work activities, as well as the taxable income arising from her father's life policy.

10. The Applicant, while understanding that she had to notify the Respondent of particular events, and which to the best of her understanding she did, stated that she was greatly confused about the manner in which her family payments were calculated, in that by way of example advices sent to her kept on reminding her that she had to advise the Respondent when her income had exceeded specific amounts for financial year 1995/96, when indeed she had already advised actual taxable income for that year. Further advices seemed to vary on how such payments were calculated as exampled by payment using a base tax year amount yet with an advice required when income exceeds $27,057.80, this amount seeming to have no relationship to either 110% of a base year amount or an estimate amount, (but indeed as was advised by the Respondent was 110% of the income free area amount of $24,598).

11. The Applicant further acknowledged that as part of the annual review of family payments she had provided actual taxable income for the previous year and an estimate for the year in progress. Thus, she had no disagreement with the following figures, which nominated an estimate of $25,165 for financial year 1997/98 and an estimate of $37,468 for financial year 1998/99.
    Submissions

12. The Applicant contended that on the correspondence she received from the Respondent, she was left with both a lack of appreciation on how and what methodology was being used to calculate her payments and confusion as to what was really relevant. In spite of her less than full understanding it was the Applicant's belief that she did supply the necessary information when either she had to or was asked for it in annual reviews.

13. Further the Applicant argued that much of her difficulty arose as a result of her commencing her police training and her subsequent posting as a probationary constable, and with changing pay rates causing difficulties with her estimates.

14. The Applicant further argued that this lack of clarity and confusion created by the Respondent's correspondence, together with the unusual circumstances of her movement through a variety of different work exposures with varying wage amounts in a short period of time, and the receipt of money from her father's life assurance, would in her expression constitute special circumstances.

15. The Respondent argued that there had been no mistakes or administrative errors committed by the Respondent, although it was conceded that one may have become confused by some of the communication. Nevertheless, the Respondent contended that the Applicant was advised as to when and for what reason she should notify the Respondent, and that she had done so on all but one occasion, that is, when her income exceeded the estimate ($25,165) given for financial year 1996/97 by 110%. It is the Respondent's contention that the Applicant's failure to advise on this has caused the consequences which must necessarily flow.

16. Further the Respondent contends that while the sum of money received by the Applicant from her father's life policy is clearly income, the fact remained that even without that money the Applicant's income for financial year 1997/98 was more than 110% of the estimate.

17. Finally the Respondent submitted that the Applicant's nominated circumstances, did not in their opinion amount to circumstances which could be considered special, when one considered the test of circumstances being "uncommon, unusual or exceptional" as laid down in a number of court decisions.
    Consideration and Findings

18. The Tribunal in preliminary comments on this matter notes the various correspondences flowing from the Respondent to the Applicant and computer records of the Respondent and in particular the following information taken from the nominated correspondence:
    a)        Correspondence of 21 July 1997 (T4)

    Rate of family payment has been calculated using actual income for the base year 1995/96 of $9,138. Applicant is to notify Respondent if income exceeds $27,057.80 in either financial year 1996/97 or 1997/98. The nominated amount of $27,057.80 is 110% of income free area of $24,598/financial year 1996/97).

b)        Correspondence of 11 September 1997 (T5)

Rate of family payment calculated using actual income for base year 1995/96 of $9,138. Applicant is to notify Respondent if income exceeds $10,057.80, (this being 110% of base year actual of $9,138) in either financial year 1996/97 or 1997/98.

c)        Correspondence of 18 June 1998 (T10)

Rate of childcare allowance has been calculated using actual income for financial year 1996/97 of $20,627. Applicant is to notify Respondent if income exceeds $22,689.70 (this being 110% of actual income of $20,627 for financial year 1996/97) in either financial year 1996/97 or 1997/98.

d)        Computer Record (T11, p34)

Identifies that the Applicant provided an estimate of income for financial year 1997/98 of $25,165 on 13 June 1997, which had a date of effect of 3 July 1997.

1. The Tribunal, in considering the factual material outlined in preliminary comments, certainly understands the difficulties the Applicant may have experienced in obtaining an understanding of methodologies used in calculations over time and indeed may have become perplexed over the apparent inconsistencies in the material. Despite this, the Tribunal does find, that at all material times the Applicant was clearly instructed as to when and how she was to notify the Respondent, an activity the Applicant undertook on all but one occasion, when her actual income for financial year 1997/98 exceeded 110% of base year income and/or income free area or estimate for that particular year.

2. The Tribunal notes that there is no disagreement between the parties on actual incomes of $9,138, $20,627 and $37,374 for the Applicant for financial years 1995/96, 1996/97 and 1997/98 respectively. Further the Tribunal notes that a sum of $8,053 was included in the Applicant's taxable income for financial year 1997/98, this sum having been received as a result of the Applicant being a beneficiary from a life policy of her deceased father. The Tribunal further notes that for the purposes of family payment a person's income for a tax year is the sum of a person's taxable income, adjusted fringe benefits, foreign income and net rental property loss.  Further the Tribunal observes that there are no provisions to disregard elements of an individual's taxable income, leaving the Tribunal to conclude that the money received from her father's life policy, as it has been treated as part of her taxable income for financial year 1997/98, should be considered as income for the purposes of assessment of family payment. In so finding, the Tribunal further observes that irrespective of the inclusion of this amount, the Applicant's income of a financial year 1997/98 would still have exceeded 110% of the base year income, or income free area, or the estimate given, in the event that the life assurance amount was excluded.

3. The Tribunal notes that Section 1069-H13 and H14 designate the appropriate tax year for calculating the rate of family payment under the family income test is the base tax year, that is the tax year that precedes the calendar year for which payment is to be made. In the matter to hand the Applicant at 3 July 1997 was being paid against a base tax year income of $9,138 (financial year 1995/96).

4. As a consequence of changes in her employment and parenting arrangements, the Applicant duly notified the Respondent of her change in employment status to trainee police constable in May 1997 and again when her son moved to live with his father in September 1997. As both of these events were notifiable events, the Tribunal, notes the following relevant legislation which provides:

   1069-H18. If:
   (a)       a notifiable event occurs in relation to a person; and

   (b)the person's income for the tax year in which the notifiable event occurs exceeds:

   (i)        110% of the person's income for the base year; and

   (ii)       110% of the person's income free area;
   the appropriate tax year, for the purpose of applying this Module to the person for the remainder of the family allowance period, is the tax year in which the notifiable event occurs.
   1069-H19If:
   (a)       a notifiable event occurs in relation to a person; and

   (b)point 1069-H18 does not make the year in which the event occurs (the event tax year) the appropriate tax year; and

   (c)the person's income for the tax year that follows the event tax year is likely to exceed:

   (i)        110% of the person's income for the base tax year; and

   (ii)       110% of the person's income free area;
   the appropriate tax year, for the purpose of applying this Module to the person for:

   (d)the part of the family allowance period in which the event occurs that comes after the end of the event tax year; and

   (e)the next family allowance period after the one referred to in paragraph (d); is the year that follows the event tax year."

1. In relation to section 1069-H18 of the Act, the Tribunal, in noting that a notifiable event has occurred in May 1997, and that as a consequence an estimate of income for financial year 1997/98 of $25,165 was given (13 June 1997), that the Applicant's base tax year income for financial year 1995/96 was $9,138 and that the Applicant's income free area was $24,598, finds that section 1069-H18 is not applicable in this matter at this point in time (July 1997) as subsection 1069-H18(6)(ii) is not satisfied in that the Applicant's income for financial year 1996/97 ($20,627) did not exceed the income free area ($24,548) by 110%.

2. In turning to a consideration of section 1069-H19, the Tribunal, in noting that a notifiable event has occurred and that section 1069-H18 is not applicable, finds on the evidence available at the time (July 1997), namely an estimate of income of $25,165 for financial year 1997/98, that the Applicant's income, while likely to exceed 110% of her income for the base tax year, is unlikely to exceed 110% of the person's income free area ($24,598) as the estimate of income of $25,165 is less than $27,057.80 (this being 110% of the income free area). As a consequence the Tribunal concludes that subsection 1069-H19(c)(ii) has not been satisfied and finds that section 1069-H19 was not applicable in this matter at this point in time (July 1997).

3. The Tribunal, in noting that the Respondent has argued that section 1069-H19 was applicable in that the original decision maker had regard to the estimate of $25,165 in the decision of July 1997, as evidenced by the computer records at T11, finds that the decision maker at the time correctly calculated the family payment by using the actual income for the base year 1995/96 of $9,138. Further, in nominating the figure of $27,057.80, the Tribunal finds that the decision maker at that time (Correspondence of 21 July 1997 – T4) was aware that while the base year income was $9,138 for 1995/96, and that this was exceeded by 110% by the estimate given for financial year 1997/98 of $25,165, the estimate provided did not exceed the income free area by 110% (the requirement being $27,057.80).

4. Similarly The Tribunal notes that the decision maker correctly identified base year income for 1995/96 of $9,138 as income for family payment calculation in the September 1997 (Correspondence of 11 September 1997 (T5)). The Tribunal further notes that child care allowance was recalculated against actual income of $20,627 for financial year 1996/97 and again concludes that the issues of income free area and the estimate of $25,165 given in June 1997 would not have changed the method of calculation as the estimate which exceeding the actual income rate by 110%, still did not exceed the income free area by 110%.

5. As a result of these considerations, the Tribunal does conclude that the decision makers did have regard to the estimate of $25,165 made by the Applicant in June 1997, and proceeded to, in the Tribunal's view, correctly assess the rate of family payment on each occasion.

6. The Tribunal notes that the estimate provided in June 1997 by the Applicant was as a consequence of a notifiable event in May 1997.  The Tribunal also notes there was a further notifiable event in September 1997, when the Applicant's son transferred to the care of his father, and that at all times during the period 3 July 1997 until October 1998, the Applicant was on notice to notify the Respondent if her income rose beyond nominated annual levels.  The Tribunal notes that the Applicant made her original estimate on the basis of her then trainee salary, a further estimate of $26,000 in October 1998 (T9), and that the next advice by the Applicant to the Respondent on 18 October 1998 nominated her taxable income for the year 1997/98  as $37514 (T9), which did include a taxable sum of $8057 from her fathers life policy.

7. As a result of its many considerations, the Tribunal finds that as a result of the Applicant's taxable income for financial year 1997/98 being $37514, the Applicants income for that year has exceeded by 110% the estimate given by the Applicant of $25165 for financial year 1997/98 and further that the decision makers during that period had regard to that estimate in making the decisions as regards the Applicant's family payment. In further consideration the Tribunal notes the following sections of the Act:

   "885(1)  If:

   (a)in working out the rate of family allowance payable to a person, regard is had to the person's income for a tax year;and

   (b)the income to which regard was had consisted of an amount estimated by the person; and

   (c)the person's income for that tax year is more that 110% of the amount of the income on which the determination of the rate of family allowance was based;

   the person's rate of family allowance is to be recalculated on the basis of that income.
   …
   891.  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;

   (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."

1. The Tribunal concludes that the facts as estimated and found by the Tribunal, satisfy the requirements of Section 885(1), and  further as a result of the application of section 891 any recalculation that has occurred as a result of the application of subsection 885(1), will have effect on the day on which the earlier determination took effect, namely 3 July 1997.

2. Subsection 1223(3) of the Act provides:

   "1223(3)  Subject to subsection (4), if;

   (a)an amount (the 'received amount') has been paid to a person by way of family allowance; and

   (b)the person's rate of family allowance is recalculated under:

   (i)section 884 (amendment of assessable income); or

   (ii)section 885  (underestimate of income); or

   (iii)section 886  (failure to notify notifiable event); or

   (iii)section 886A (overestimate of child maintenance expenditure); 

   and

   (c)the received amount is more than the amount (the 'correct amount') of the family allowance payable to the person:

   the difference between the amount and the correct amount is a debt due to the Commonwealth."

1. As a consequence of subsection 1223(3), any excess family payment made constitutes a debt to the Commonwealth and the Tribunal so finds that the Applicant has a debt of $4890.96 rising out of overpayment of family payment to the Applicant for the period 3 July 1997 to 22 October 1998.

2. The Tribunal, in considering whether all or part of the debt should be waived, notes firstly subsection 1237A(1) which provides:

   "1237A(1)  Subject to subsection (1A) , the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt."

1. In earlier comments, the Tribunal has expressed some reservations concerning the difficulties the Applicant may have experienced in gaining an insightful understanding of the methodologies used in calculating family payment from the correspondence she received.  Nevertheless as also stated earlier, the Applicant was clearly instructed on how and when she had a duty to notify the Respondent.  The Tribunal notes that the Applicant did notify on all occasions, even when she informed the Respondent of her actual income of $37514 for financial year 1997/98 on 18 October 1998.  Further the Tribunal notes that the Applicant did provide the Respondent with an estimate of income of $25765 for financial year 1997/98 on the 13 June 1997, and it is the difference between the estimate and the actual income which in the Tribunal's opinion is the cause of the problem in this matter.

2. The Tribunal, having analysed the exchange of correspondence between the two parties against the workings of the Act, finds that there was no administrative error made, and even if there were (which is not the Tribunal's finding) the Applicant, by virtue of the estimate given (albeit being given with best knowledge and intent) assisted in any error created by the provision of an estimate which later proved to be inaccurate, and at which over a period of some 16 months was not significantly connected. As a consequence the Tribunal finds that there are no grounds for waiver of the debt under section 1237A(1).

3. Section 1237AAD of the Act provides:

   "1237AAD  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 form the debtor or another  

   person knowingly

   (i)        making a false statement or false representation; or

   (ii)failing or omitting to comply with a provision of this Act or the 1947Act; 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 Tribunal, in consideration of section 1237 AAD, and the test for special circumstances, as nominated by Toohey J, in Re Beadle and Director General of Social Security (1984)6 ALD 1, in which he stated:

"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."

Concludes that the Applicant's circumstances do not fall within this definitional ambit. In so stating the Tribunal has given consideration to the nature of the error (an innocent but erroneous estimate), the existence of an overpayment without income from the life policy included as taxable income, the domestic, financial and employment aspects of the Applicant at the relevant time and the confusing effect of some of the correspondence to the Applicant.

1. Finally the Tribunal considers that there are no circumstances which have been defined in evidence, which would allow the debt to be written off under section 1236(1A) of the Act
   DETERMINATION

2. The Tribunal determines that the decision under review is affirmed.

   I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of Dr J Campbell (Member)

   Signed:         .....................................................................................
     Associate

   Date/s of Hearing  14 January 2000
   Date of Decision  29 May 2000
   Representative for the Applicant              Applicant was self represented       
   Representative for the Respondent        Ms A Smith, Departmental Advocate