Doolin and Secretary, Department of Family and Community Services

[2004] AATA 164

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 164

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No V03/947

GENERAL ADMINISTRATIVE  DIVISION		)
Re		JULIE DOOLIN

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mr J Handley, Senior Member

Date19 February 2004

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(Sgd)  J Handley

Senior Member

SOCIAL SECURITY – Family Tax benefit – applicant received lump sum arrears of maintenance from Child Support Agency – monies assessed in year of receipt – FTB significantly reduced – unintended consequence – recommendation – decision affirmed

A New Tax System (Family Assistance) Act 1999 (Cth) s 58(1) cl 20A cl 24

Social Security Act 1991 (Cth) s 1061A(4)

Re Blunden and Secretary, Department of Family Community Service [2000] AATA 273   5

REASONS FOR DECISION

19 February 2004 Mr J Handley, Senior Member     

1.      Ms Doolin applied to review a decision made by the Social Security Appeals Tribunal (“the SSAT”) on 6 July 2003.  The SSAT then decided to affirm a decision made by an officer of Centrelink on 29 January 2003 to reduce Ms Doolin’s rate of Family Tax Benefit (“FTB”) by reason of maintenance income that had been received.

2.      The circumstances giving rise to this review are unfortunate and demonstrate, in my view, an unintended consequence of the applicable legislation being A New Tax System (Family Assistance) Act 1999 (“the Act”).

3.      The hearing was convened in Ballarat on 12 February 2004.  Ms Doolin appeared without representation.  Ms Katherine Navarro appeared on behalf of the respondent.

4.      The circumstances giving rise to this application may be briefly summarised as follows.

5.      Ms Doolin is the mother of two children – Alexander born on 13 August 1992 and Emily born on 14 July 1994.  At all relevant times Ms Doolin was entitled to FTB with respect to the children.  She was also entitled from time to time to a payment of maintenance (“maintenance income”) from each father of each child.  Payment of maintenance has been erratic and without predicability.

6.      On 29 January 2003, Ms Doolin received a payment of arrears of child support – as collected by the Child Support Agency (“CSA”).

7.      It appears that the father of Emily lodged a tax return sometime prior to 29 January 2003.  It also appears that he was considerably in arrears in his payment of child maintenance.  By reason of the powers available to the CSA it collected and paid to Ms Doolin the sum of $8896.25 which would have otherwise been payable by way of a taxation refund to Emily’s father.

8.      Prior to the receipt of that sum Ms Doolin had received payments of child support from time to time from the father of Emily which had affected – in a minor degree – the fortnightly entitlement to FBT.  Ms Doolin was content with the decisions then made by Centrelink to vary her fortnightly rate of payment.  It was largely by reason of the calculation methods used by Centrelink that she agreed in November 2000 to have FBT calculated by the “disbursement” or “actual assessment” method.

9.      It was not then envisaged, or at any other time, that Emily’s father would lodge a tax return which would give rise to collection by the CSA and payment to her of a lump sum payment of arrears of maintenance.  By reason of that sum being paid in a year of income, the disbursement method of calculation of FTB resulted in a significant reduction in fortnightly FTB payments and – as was learnt at the hearing – a claim by Centrelink upon Ms Doolin for refund of approximately $2000 overpaid.  The decision concerning overpayment is not subject to this review but apparently is a consequence of the benefit being paid for some time after 29 January 2003, when the arrears of CSA were also paid.  The overpayment sum is presently being paid by Ms Doolin to Centrelink at $10 per fortnight by withholdings from current benefit.

10.     Ms Doolin indicated at the hearing that she understood the legislative basis for the decision made by Centrelink and agreed with the calculations that it made as to present entitlement.

11.     Her concern however is at three levels namely:

(a)The moneys that were received as payment of lump sum arrears of maintenance were expended mainly on the provision of furniture, household equipment and bicycles for her children.  The expenditure of those moneys in part contributes to her inability to repay the overpayment in full;

(b)The present legislation under which the applicable calculations had been made by Centrelink did not exist for a greater part of the period of time when the arrears of maintenance accrued; and

(c)In the event that the father of Alexander lodges a tax return and if he is assessed as having an entitlement to a refund, that money is likely to be diverted to her and a further lump sum payment of maintenance arrears will be paid which will give rise to the potential for a further reduction in her FTB payments.

THE LEGISLATION

12. Section 58(1) of the Act provides that the annual rate of FTB is to be calculated in accordance with the Rate Calculator in Schedule 1 of the Act.

13. Clause 20A of Schedule 1 of the Act provides a formula to calculate the rate of FTB where an individual receives maintenance income in an income year. The formula is represented as follows:

20A Annualised amount of maintenance income

Object of clause

(1)The object of this clause is to annualise the maintenance income (other than capitalised maintenance income) (CMI) of an individual during an income year.

Annualisation of maintenance income other than CMI

(2)If an individual receives maintenance income (other than CMI) from another individual during any period or periods (the relevant period or periods) in an income year, the annualised amount of the maintenance income of the individual is worked out using the following formula:

The amount of maintenance income (other than CMI) received by the individual during the relevant period or periods

     Number of days in the income year

X   Number of days in the relevant period or periods

14.     The effect of this formula is to “annualise” the amount of maintenance income, thereby treating the whole of the amount received as if it were maintenance income payable for the year in which it is received.

15.     The consequence therefore of applying this formula is to have regard to the whole of the lump sum maintenance payment when calculating the FTB rate.  It is not possible, or permissible, to apportion that sum over the number of years of arrears as represented by the lump sum amount.

16.     Significantly, the clause and the formula provides that the amount of the maintenance income – in this case $8896.25 is to be regarded because it was “received by the individual during the relevant period or periods”.  For the purposes of the legislation, the relevant period is a financial year commencing on 1 July and ending on 30 June.  It follows therefore that despite the payment of $8896.25 being received on 29 January 2003 that sum is annualised for the whole of the financial year ending 30 June 2003.

17. Clause 20A of Schedule 1 of the Act applies with respect to maintenance income that is not “capitalised maintenance income” as defined.  Such income is that which is neither paid as a periodic amount nor provided on a periodic basis and which exceeds $1500.  The payment of arrears in the present case is not a “periodic amount” nor is it a benefit which has been provided on a “periodic basis”.

18. Accordingly cl 24 of Schedule 1 of the Act does not apply which permits the apportionment of capitalised maintenance income “over the whole of the period in respect of which it is received”.

19.     The legislative objective of treating arrears of maintenance payments as maintenance income in the year of receipt is not without controversy.  In Re Blunden and Secretary, Department of Family Community Service [2000] AATA 273 his Honour, von Doussa J, sitting as a Presidential Member of the Tribunal reviewed a decision of the SSAT concerning the rate of benefit payable to a beneficiary who had received a payment of arrears of maintenance income. His Honour expressed concern that the amount paid and the formula applied would cause a rate of benefit to be drastically reduced, however he was satisfied that the amount paid was “maintenance income” and that it was a payment that was “received” by the beneficiary.  He concluded (paragraph 29) that the legislation focussed on the receipt of the payment of the benefit, but acknowledged that the legislation was not:

.. . . unlimited by any condition requiring that the payment or benefit relate to any particular period. It is an unfortunate fact that a liability by one parent, to pay child maintenance to another, is often not discharged on time. By defining maintenance income as a benefit or payment “that is received by” a person, without limitation as to when the recipient became entitled to receive the benefit or payment, the definition is cast in terms which takes account of the likelihood that many payments of child maintenance will be made late.

CONCLUSION

20. The relevant legislation does produce an unintended consequence, that is a reduction in FTB when a parent of a child receives arrears of maintenance. Single parents are exposed to vulnerability – not the least economic – and are dependent on FTB. In Ms Doolin’s case, she is dependent upon an advance from Centrelink at the beginning of each calendar year to permit her to meet school fees for both children. In the present year, she was denied that benefit because of the outstanding debt which has occurred by reason of the recalculation of FTB (refer s 1061A(4) of the Social Security Act 1991).  Additionally, she is at risk in the future of having the fortnightly benefit reduced if either father of the children lodges a tax return and the CSA is able to collect moneys being arrears of maintenance.

21.     It may be that the legislature envisaged the annualising of maintenance payments in circumstances where such payments were made on a regular or semi regular basis and then of modest amounts.  I doubt that had it been envisaged that the CSA would collect a substantial sum of arrears, that such sum would have the significant financial consequences that has occurred in the present case.  On the one hand, Ms Doolin has been without the benefit of those moneys for many years.  When those moneys are eventually received, she is then financially disadvantaged by having her FTB rate significantly reduced.

22. The present legislation does not allow any decision other than to affirm the decision made by the SSAT. Additionally there is no provision within the legislation for the exercise of any discretion or the application of the principles of waiver or write off or special circumstance, sometimes applicable in other circumstances arising under the Act.

23. The Act recognises a maintenance payment known as “capitalised maintenance income” (cl 24 of Schedule 1). The legislation permits apportioning of such a payment over a period of time. This would have the effect of preserving a substantial part of the FTB payment. It certainly would not cause an FTB payment to be significantly reduced.

24.     I would therefore urge, having regard to the circumstances endured by Ms Doolin, that in any review of the present legislation, consideration be given to reviewing the definition of “capitalised maintenance income” to allow it to embrace situations where a single parent receives a lump sum payment of arrears of maintenance.

I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of
Mr J Handley, Senior Member

Signed:         Holly Weston
  Associate

Date of Hearing  12 February 2004
Date of Decision  19 February 2004
Solicitor for the Applicant          Self
Departmental Advocate            Ms K Navarro