De Jager; Secretary, Department of Social Services and (Social services second review)

[2015] AATA 828

De Jager; Secretary, Department of Social Services and (Social services second review) [2015] AATA 828 (27 October 2015)

Division	General Division
File Number	2015/2699
Re	Secretary, Department of Social Services
APPLICANT
And	Jan De Jager
RESPONDENT

DECISION

Tribunal	Justice Kerr, President Senior Member Bernard J McCabe
Date	27 October 2015
Place	Brisbane

The Tribunal affirms the decision under review.

......................[sgd]..................................................

Justice Kerr, President

CATCHWORDS

SOCIAL SECURITY – Family Assistance – Family Tax Benefit – where claimant not required to lodge a tax return – failure to notify Centrelink of non-lodger status – adjusted taxable income – timing of reconciliation event – date of effect – mandatory review – statutory interpretation

LEGISLATION

A New Tax System (Family Assistance) Act 1999 (Cth) ss 16, Schedule 1, Schedule 3
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) ss 105, 107, 105A, Part 3, Division 1, Subdivision D
Social Security and Other Legislation Amendment Act 2014 (Cth)

Family Assistance Legislation Amendment (More Help for Families—Increased Payments) Act 2004 (Cth)

CASES

Secretary, Department of Social Security v O’Connell; Secretary, Department of Social Security v Sevel (1992) 38 FCR 540
Llewellyn and Secretary, Department of Families, Community Services and Indigenous Affairs (2007) 99 ALD 129
Project Blue Sky v ABA (1998) 194 CLR 355

REASONS FOR DECISION

Justice Kerr, President
Senior Member Bernard J McCabe

27 October 2015

1. Mr Jan De Jager was paid the family tax benefit (“FTB”) in fortnightly instalments throughout the 2012-2013 financial year. The entitlement to the payments arose under the A New Tax System (Family Assistance) Act 1999 (Cth) (the “Assistance Act”) but the rate of payments throughout the year was set in a series of determinations made pursuant to s 16 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the “Administration Act”). In the ordinary course, Mr De Jager would expect to receive two further amounts – the FTB Part A and B supplements – at the end of the financial year following a reconciliation process. That would be achieved through the mechanism of a review under s 105 of the Administration Act. Other things being equal, the reconciliation process would lead to a decision under s 105 to vary the entitlement so that the extra amounts could be paid in a lump sum.

2. The review was carried out and the Secretary concluded Mr De Jager had an entitlement to an additional $1,361.45 in respect of the FTB A and B supplements. Mr De Jager was notified of the decision on 14 November 2014: exhibit A1 at p 85. But the notice pointed out a catch: the Secretary claimed she was unable to pay the additional amount “because you did not confirm your income for the 2012-2013 financial year by 30 June 2014”.

3. The Secretary concedes the reason given in the notice for the non-payment of the amount in dispute was incorrect, and there is some doubt over whether the decision made on 14 November 2014 was valid in any event. The Secretary now says the real obstacle to payment lies in s 107(1)(f) of the Administration Act. Section 107(1)(f) purports to limit the date of effect of a decision made under the section. Where the Secretary does not carry out the reconciliation and review under s 105 before the end of the financial year following the year in which instalments were paid, the earliest date of effect of the decision is the first day of the following financial year when the reconciliation and review was completed. In practice, that means the decision-maker was unable to backdate the decision – and that meant the payments could not be made.

4. We disagree. While we acknowledge that interpretation of the Administration Act is open, the better view is that the limitation on dates of effect in s 107 does not apply to reviews under s 105 that are mandated by s 105A. We explain our reasons below.

   The background to the dispute

5. Mr De Jager and his wife did not work during the year of income in question. Mr De Jager relied on Centrelink payments but the couple also had a daughter who was regarded as an FTB child for the purposes of the Assistance Act. Mr De Jager was eligible to receive the FTB. FTB is a means-tested payment. That means he was required to inform Centrelink of his income.

6. Mr De Jager was paid FTB on a fortnightly basis. In those circumstances, s 16 of the Administration Act obliged the Secretary to use the FTB rate calculator in Schedule One to the Assistance Act to determine the daily rate at which the claimant was eligible to be paid. Those determinations might be (and were) varied during the course of the year as relevant information came to hand.

7. We accept Mr De Jager regularly provided Centrelink with accurate information about his income, and the income of his wife. Mr De Jager explained at the hearing that he monitored his online account with Centrelink and submitted information through the website, although he also recalled face-to-face meetings with Centrelink officers regarding his Newstart allowance. The record of his final online report with respect to the financial year is dated 9 July 2013. The report is reproduced at exhibit A2 at p 70. The report confirms there was no income received in the final period of the financial year and he declared there were no changes that had not already been notified. Mr De Jager’s counsel, Mr Black, argued at the hearing that – following the report of 9 July 2013 – the Secretary had all the information required to complete the reconciliation.

8. The Secretary sent a notice to Mr De Jager dated 20 March 2014 to advise that he and his partner should lodge an income tax return or inform Centrelink that he is not required to lodge a return in respect of the 2012-2013 financial year by 30 June 2014. The note referred to benefits that were available – including FTB supplements – if Mr De Jager lodged a return or advised the Secretary before 30 June 2014 that he was not required to do so.

9. The letter is misleading. It refers to benefits that might be available if the Secretary was told about the tax return, but does not squarely refer to the crucial information the Secretary required (which Mr Black says had already been provided to Centrelink) about Mr De Jager’s income that was necessary to finally determine his entitlements.

10. Mr De Jager said he did not recall receiving the letter dated 20 March 2014. However, he was summoned to attend another face-to-face interview with a Centrelink officer on 18 April 2014 where his income and circumstances were discussed. Mr De Jager said in his statement that he recalled mentioning on that occasion that he would not be filing an income tax return with respect to the relevant year of income (exhibit R1 at para 11). There is no record of that advice. In his oral evidence at the hearing, Mr De Jager was less certain in relation to aspects of his claim. We make no criticism of him for this: the meetings in question occurred some time ago and they were routine to him at the time. But he had no particular reason for mentioning his return if he was not aware of the letter of 20 March 2014. If the issue had come up, we expect it would have been recorded (although we wonder why he was not asked the question at the time if the Secretary thought the information was important). We are inclined to accept Mr De Jager did not inform the officer at the meeting in April 2014 that he was not intending to file an income tax return.

11. Mr De Jager also received an SMS from Centrelink before the end of the 2013-2014 financial year reminding him of the obligation to inform Centrelink whether he would be lodging a return. Mr De Jager told the Social Security Appeals Tribunal (the SSAT) that he did not recall receiving the SMS but there is no reason to doubt it was sent. In any event, it seems Mr De Jager did not contact Centrelink before 30 June 2014 to advise he would not be lodging a tax return.

12. Mr De Jager said he called Centrelink once he received the notice of its decision on 14 November 2014. He says the call was prompted by the notice. The decision was not made following a telephone discussion with him. We have no reason to doubt that evidence: there was no suggestion Mr De Jager had any other reason to call Centrelink on that date. During the call, the Centrelink officer asked Mr De Jager a series of questions about his income; the answers to those questions are recorded at exhibit A1 at 98. (Mr De Jager did not have a clear recollection of what he was asked during the course of the discussion on that date, but he accepted he may have provided the information that was recorded.) The questions asked of Mr De Jager were more specific and detailed than the questions asked of him when he reported his income online, but the answers were ultimately the same: the only income Mr De Jager received during the year of income in question was from Centrelink.

13. Mr Black argued that if the Secretary was able to make the decision contained in the notice of 14 November 2014 without the additional information subsequently obtained from Mr De Jager, a decision could have been made at any time between when Mr De Jager reported his final income to Centrelink in July 2013 and the end of the financial year on 30 June 2014. Mr Johnson, who appeared for the Secretary, acknowledged it was possible the decision was not validly made on 14 November 2014 – but pointed out any shortcoming in the decision was cured once the additional information was obtained. Moreover, he argued that even if the decision could have been made earlier, it was not.

14. We suspect the original decision-maker proceeded on the basis that no positive decision could be made in Mr De Jager’s favour because Mr De Jager had not advised he was not lodging a tax return. As we will explain, that was the wrong approach.

15. We note the letter of 14 November 2014 invited Mr De Jager to contact Centrelink if there were any special circumstances that prevented him from confirming his income by 30 June 2014. That is surprising given the Act did not appear to include at the time a discretionary power to change the decision or waive its consequences in the event of special circumstances.

16. The authorised review officer (the ARO) affirmed the decision of 14 November 2014 but it was set aside by the SSAT on 23 April 2015. The Secretary has sought review of that decision on different grounds that were not argued before the SSAT. The Secretary relies on the same argument in a large number of other cases that are before the Tribunal. We expect our decision might be of interest in those cases.

    The legislative scheme

17. We have already explained the daily rate of FTB is initially determined pursuant to s 16 of the Administration Act. (In this case, a number of s 16 determinations were made during the course of the financial year in question as updated information was provided. There is nothing remarkable in this.) We have also explained the Secretary was required to make her determination in each case using the FTB rate calculator in Schedule 1 to the Assistance Act, and that the Secretary had the power to revisit determinations pursuant to s 105 of the Administration Act.

18. There is a series of provisions in Part 3, Division 1, Subdivision D of the Administration Act that are important to this discussion. Section 32A requires that the Secretary disregard the amounts of the FTB supplements when making or varying a determination until the claimant “has satisfied the FTB reconciliation conditions” which apply in the relevant period. In the absence of s 32A and the provisions that follow, the amount of the supplements would be relevant when making the determination. In essence, that would mean the claimant would be paid at a higher daily rate – but there would also be a greater danger of being required to repay some of that money at the end of the financial year if a claimant had earned more than estimated. Section 32A and the related provisions mean part of an individual’s ultimate entitlements could effectively be held back until it was clear he or she was entitled to be paid the further amount. Once it was clear the claimant was entitled to be paid, the amounts were paid in a lump sum. It follows it is important to determine when the reconciliation conditions are satisfied.

19. Section 32B says the reconciliation conditions will be satisfied at one of the relevant reconciliation times identified in ss 32C-32Q. Each of those sections deals with claimants in different circumstances.[1] Some of the sections provide for reconciliation times that may occur a significant time after the end of the financial year: for example, ss 32C and 32D refer to the relevant reconciliation event occurring before the end of the second income year following the relevant year of income. In this case, s 32J is relevant. It identifies the relevant reconciliation time where the claimant is not required to lodge a tax return. Section 32J(2) provides the relevant reconciliation time will be the earlier of:

    (a)the time after the end of the relevant income year when the first individual notifies the Secretary of the amount of the first individual's adjusted taxable income for the relevant income year;

    (b)the time after the end of the relevant income year when the Secretary becomes satisfied that the first individual's adjusted taxable income for the relevant income year can be worked out without receiving a notification from the first individual.

    [1] Section 32B(b) deals with a situation where more than one of the other sections might apply. In such a case, the later of the dates is the relevant reconciliation time.

20. The expression adjusted taxable income is defined in Clause 2 of Schedule 3 to the Assistance Act. An individual’s adjusted taxable income is the sum of the following income components less the amount of the individual's deductible child maintenance expenditure for that year:

    (a) the individual's taxable income for that year;

    (b)the individual's adjusted fringe benefits total for that year;

    (c)the individual's target foreign income for that year;

    (d)the individual's total net investment loss (within the meaning of the Income Tax Assessment Act 1997 ) for that year;

    (e)the individual's tax free pension or benefit for that year; and

    (f)the individual's reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997 ) for that year.

21. The questions asked by the Centrelink officer on 14 November 2014 were obviously directed to obtaining the information required to assess adjusted taxable income under Clause 2 of Schedule 3. We understand the questions were necessarily more specific and probing than the general questions about income that were answered by Mr De Jager online during the course of the financial year, and in July 2013. As it happens, Mr De Jager’s answers to the specific questions in November 2014 confirmed his adjustable taxable income was the same amount he had reported in response to the more general questions that were asked before.

22. The Secretary contended the relevant reconciliation time for the purpose of s 32J was 14 November 2014. The SSAT agreed because it did not accept Mr De Jager informed Centrelink before that date that he would not be lodging a tax return. Mr Black argued the relevant reconciliation time was really in July 2013 because the Secretary had access to all of the information that was required to complete the reconciliation process once Mr De Jager filed his end of year declaration. The SSAT disagreed with Mr De Jager on this point: it concluded the Secretary could not be expected to conduct an audit of each recipient of the FTB to determine whether a tax return was to be lodged.

23. We accept the relevant reconciliation time was 14 November 2014. Only then did the Secretary address the question of Mr De Jager’s adjusted taxable income. We also accept those questions would not be prompted in the ordinary course until the Secretary learned whether the claimant was planning to lodge a return.

24. Having established the relevant reconciliation time was 14 November 2014, the next step is the review which is required because the original determination under s 16 disregarded the Parts A and B supplements pursuant to s 32A. The review process requires the Secretary to take those matters into account with a view to assessing whether the claimant is entitled to a further lump sum payment following the end of the financial year, or alternatively, whether there has been an overpayment. But the parties take different approaches to the review process.

25. The Secretary notes s 105(1) gives her the discretion to revisit an original decision if she is satisfied there is sufficient reason for doing so. If the Secretary does exercise the discretion and conducts a review, s 105(4) says she may decide to affirm, vary or set aside the original decision. But the Secretary acknowledges s 105A(2) says the Secretary must revisit the earlier determination in certain circumstances. If the circumstances referred to in s 105A(2)(a), (b) and (c) exist – and they do in this case - the Secretary will:

    (i)be taken to be satisfied under s 105(1) there is sufficient reason to conduct the review, and

    (ii)must proceed to conduct the review so that the matters which were previously disregarded pursuant to s 32A can be taken into account.

    However, on the Secretary’s approach, s 105A merely operates to mandate a review conducted under s 105 in the circumstances that prevail here. In short, the Secretary contends that the review then undertaken is one properly characterised as a review under s 105, and not s 105A.

26. Mr De Jager contends for a different approach to the review process. He says the review mandated by s 105A is not a review under s 105. Rather, it is a review under s 105A. Mr Black explained in written submissions that the text of s 105A(2)(e):

    “specifically (and, it is submitted, deliberately) requires the Secretary to exercise the power in s 105(1) without that exercise of power becoming a review ‘under’ s 105(1) for present purposes.”

27. Mr De Jager wishes to establish the review is not conducted under s 105 because of the implications of s 107(1). That sub-section creates a limit on the date of effect of any review decision made under s 105. In particular, s 107(1)(f) says (in a situation like this, at least) the review decision can only take effect on the first day of the income year before the income year in which the decision was made. Mr Johnson submitted the operation of s107(1)(f) means the review must be completed within a 52 week ‘window’ following the year of income in which the FTB was paid. In this case, because the review was not triggered until 14 November 2014, the earliest date on which the review decision could take effect was 1 July 2013 – that is, the first day of the financial year after the year in which arrears would otherwise be payable. If that is so, he submitted, the practical effect is that no arrears payments can be made.

28. We do not accept that reviews are conducted under s 105A. Subsections 105A(2)(d) and (e) plainly contemplate the review being conducted under s 105. Section 105A operates to mandate a review under s 105 that would otherwise be discretionary.

29. But that is not the end of the matter. While we agree with the respondent that reviews proceed under s 105, we do not accept that a s 105 review mandated by s 105A is subject to the limitation imposed by s 107(1)(f) that is applicable to discretionary reviews under s 105.

30. In Project Blue Sky v ABA (1998) 194 CLR 355, 381-382 McHugh, Kirby, Gummow and Hayne JJ held as follows (footnotes omitted):

    [69] The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed.

    [70] A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.

1. In a paper delivered at a conference under the auspices of the Judicial College of Victoria and the Melbourne Law School on 15 March 2013 The Constitutional Role of the Judge: Statutory Interpretation, the Honourable Justice Susan Kenny said of those passages:

   The assumption is that the legislature, being a rational body, can be taken to have intended to give effect to a rational purpose in enacting the provision.

2. We respectfully adopt that pithy summary.

3. We acknowledge s 107 refers to reviews conducted under s 105 without distinguishing between discretionary reviews and those mandated under s 105A. But the language of s 107 must be read in light of the fact the Administration Act was amended to include Part 3, Division 1, Subdivision D and s 105A. We have already noted that some provisions in Subdivision D contemplate reconciliation times occurring a significant time after the end of the financial year in which the FTB was paid – and certainly outside the 52 week ‘window’. If s 107 were to operate to limit the date of effect of all s 105 reviews, the reconciliation times provided for in a number of provisions in Subdivision D would be deprived of any practical effect. That makes no sense.

4. We acknowledge Mr Johnson argued s 107 may not completely neuter a determination that an entitlement would otherwise be payable. He suggested a decision that someone was otherwise entitled to a payment that could not be paid by reason of s 107 would nonetheless create a credit that could be offset against a subsequent liability. On that approach, the limitation provision merely prevented the payment of arrears but it did not otherwise affect the accounting. We also acknowledge that parliament did incorporate into the body of s 107 a number of exceptions to the operation of the general rule in s 107(1)(f). Those express exemptions are found in other subsections in s 107. We accept the fact parliament turned its mind to the need for exemptions that were expressly applicable in other circumstances might weaken the argument that an exception ought to be implied in the circumstances of this case.

5. While acknowledging the force of those submissions, we think the better view of the legislation starts with the proposition enunciated by the Full Federal Court in Secretary, Department of Social Security v O’Connell; Secretary, Department of Social Security v Sevel (1992) 38 FCR 540. In that case, the Court was considering an appeal from this Tribunal on the question of whether the recipients of family allowance who had failed to provide information and had their payments cancelled as a result could subsequently recover arrears. Wilcox, French and Lee JJ explained (at pp 545-546) the loss of payments in the event of delay or non-compliance almost always resulted in damage to the child. Their honours cautioned (at p 546):

   Given the evident parliamentary intention to protect the interests of dependent children, an interpretation of the Act leading to a loss of allowance by qualified people should be adopted only in the clearest of cases.

6. We acknowledge that – if viewed in isolation - the language of ss 105 and 107(1)(f) suggests all decisions made following a review under s 105 are subject to the rule regarding date of effect in s 107(1)(f). But we are satisfied a different interpretation ought to be adopted when the words of those sections are read in the wider context of the legislative scheme. That scheme includes provisions in Subdivision D that contemplate reconciliation events that might (or in some cases must) occur outside the 52 week window following the year of income in question. We note that has continued notwithstanding subsequent amendments made, for example, to s 32D by the Social Services and Other Legislation Amendment Act 2014 (Cth). The parliament plainly intended claimants covered by those provisions to have the benefit of the additional lump sum FTB payments if they otherwise qualified. It would be odd if parliament were to facilitate the entitlement in Subdivision D but then deprive those provisions of any practical effect through the blanket application of s 107(1)(f).

7. We do not think parliament intended such a perverse outcome when a more benevolent construction of the Act is available. We are satisfied s 107 was effectively amended when Subdivision D was introduced into the Act in the Family Assistance Legislation Amendment (More Help for Families—Increased Payments) Act 2004 (Cth). Those provisions effectively ousted the general time limitation in s 107(1)(f) where the review under s 105 was mandated by s 105A. That approach to the law avoids the arbitrary consequences that would flow from the Secretary’s interpretation of the Administration Act. It is also more consistent with the intention of parliament revealed in the legislative scheme.

8. However, assuming we are in error in that regard we also conclude that the ordinary grammatical meaning of the text of sections 107 and 105 is inconsistent with the outcome for which the Secretary contends for the operation of s 107(1)(f) in the limited class of matters when a review under s 105 is undertaken as mandated by s 105A.

9. In such a case the Secretary must conduct the review as prescribed by s 105A. In such a review the Secretary is directed by s 105A(2)(f) that she must take into account each of the matters set out in s 105A(2)(a) that previously she had been directed to disregard. The self-evident purpose of that statutory command is to establish the quantum of any supplement(s) that are to be paid as a lump sum to a person who had claimed family tax benefits. If needed, confirmation of that purpose can be discerned in the Second Reading Speech of the Honourable Lawrence Anthony when introducing the Family Assistance Legislation Amendment (More Help for Families—Increased Payments) Bill 2004. The Minister refers to the benefits due to an applicant so calculated as payable as a lump sum unless any part of that lump sum is required to be withheld and offset against any earlier overpayment—see also Llewellyn and Secretary, Department of Families, Community Services and Indigenous Affairs (2007) 99 ALD 129.

10. In Mr De Jager’s case the Secretary’s task was to calculate the lump sum due to him by applying the mandatory rules pursuant to s 105A. On the facts applying to Mr De Jager, assuming we are wrong in our primary conclusion, s 107(1)(f) then applies to require the date of effect of that review decision to be 1 July 2013. Giving effect to the review decision as at that date does not require any alteration of the sum so calculated or change its character as a lump-sum due to the applicant under the scheme established by Subdivision D. It simply requires the Secretary’s decision to operate from a later date. Given the ordinary grammatical meaning of the words “the date of effect of the decision is” we are not persuaded that s 107(1)(f) has any further work to do. Those words do not suggest they authorise the Secretary to deny Mr De Jager his entitlement once she has so determined it. Whichever date applies Mr De Jager is therefore entitled to have the SSAT’s decision on review, albeit made for reasons all parties and the Tribunal now accept to have been erroneous, affirmed.

11. Nothing in the language of s 107 speaks of overriding the operation of s 105A by denying entitlement to payment of the amount determined by the Secretary as due on a review mandated in accordance with its terms. That is unsurprising. Section 107(1)(f) was contained in the Act before Subdivision D was inserted. Its language simply does not mesh with those later provisions so as to require the outcome now contended for by the Secretary.

12. We do not contest the common assumption of counsel that if the Secretary conducts an ordinary own-motion review under s 105 different considerations would apply.

13. Our reasons are limited to our conclusion that it would strain the language of s 107(1)(f) beyond the permissible limits of the rules of statutory construction for this Tribunal to construe a provision that on its face simply operates to determine the date of effect of a decision, so as to read into those word additional language requiring the outcome submitted for by Mr Johnson on behalf of the Secretary in the specific instance of a review decision made under s 105 when that review is required to be conducted in accordance with s 105A.

14. Thus, assuming we are in error in respect of our primary conclusion, applying s 107(1)(f) to the decision the Secretary made on 14 November 2014 has no practical consequence adverse to Mr De Jager’s entitlement to the lump sum the Secretary determined was due to him. That decision has effect as from 1 July 2013.

    Conclusion

15. The decision under review is affirmed.

I certify that the preceding 45 (forty -five) paragraphs are a true copy of the reasons for the decision herein of Justice Kerr, President and Senior Member Bernard J McCabe

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Associate

Dated 27 October 2015

Date of hearing	8 October 2015
Counsel for the Applicant	Mr G Johnson SC
Solicitors for the Applicant	Sparke Helmore
Counsel for the Respondent	Mr M Black
Solicitors for the Respondent	Legal Aid Queensland