Edwards and Anor; Secretary, Department of Family and Community Services

[2004] AATA 500

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 500

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2003/720

GENERAL ADMINISTRATIVE  DIVISION		)
Re		SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES

Applicant

And JOHN EDWARDS

Respondent

And            MAREE HOWARD

Second Respondent

DECISION

Tribunal Deputy President Don Muller
Ms M Carstairs, Member

Date19 May 2004

PlaceBrisbane

Decision

The Tribunal sets aside the decision under review and in substitution decides that:
1.  John Edwards has a recoverable family tax benefit debt for the period 29 January 2002 to 7 April 2003;  and

2.  The right to recover the debt for the period 29 January 2002 to 30 June 2002 is waived.

...............SIGNED....................

D.W. MULLER

DEPUTY PRESIDENT

CATCHWORDS

SOCIAL SECURITY – family tax benefit debt due to changes in shared care – debt can be raised at any time – not necessary to wait for reconciliation at end of financial year – decision set aside – part of debt waived – special circumstances – decision set aside

A New Tax System (Family Assistance) Act 1999

A New Tax System (Family Assistance)(Administration) Act 1999: ss3(4), 16(2), 20, 21, 31 31A, 71(2), 97(2), 101, 105

Efstratiadis v Commonwealth (1990) 22 FCR 167

Secretary Department of Social Security v Alvaro (1994) 19 AAR 460

Re Waller and Secretary Department of Social Security (1985) 8 ALD 26

Secretary Department of Social Security v Hales (1998) 51 ALD 695

REASONS FOR DECISION

Deputy President Don Muller
Ms M Carstairs, Member   

1.      Until 29 January 2002, John Edwards, the First Respondent was receiving Family Tax Benefit (FTB) in respect of his three children M, A and G, pursuant to the provisions of the A New Tax System (Family Assistance) Act 1999 (the FA Act). On 29 January 2002, the three children left Mr. Edwards and went to live with their mother, Ms. Howard. Mr. Edwards was overpaid FTB in respect of the three children between 29 January 2002 and 7 April 2003, because his share of the care of his children during that period was significantly less than the share for which he had been paid.

2.      On 16 April 2003, Centrelink decided to raise and recover the overpayment in relation to two periods, namely, 29 January 2002 to 30 June 2002 and 1 July 2002 to 7 April 2003, pursuant to the A New Tax System (Family Assistance) (Administration) Act 1999 (the FAA Act). The total debt for the two periods was originally calculated to be $1457.36, later increased by $52.65 and re-calculated to be $1510.01.

3.      By a decision dated 8 August 2003, the Social Security Appeals Tribunal (SSAT) affirmed the decision to raise and recover the debt for the period 29 January 2002 to 30 June 2002, but set aside the decision to recover the debt for the period 1 July 2002 to 7 April 2003.  The SSAT decided that any debt arising in the 2002/2003 financial year could only be raised as part of the reconciliation of Mr. Edwards FTB payments, his entitlements and his taxable income for that financial year 2002/2003.  That is, that it was premature to raise the debt before the end of the financial year.

4.      The Secretary, Department of Family and Community Services seeks a review of the decision of the SSAT that the debt which occurred in the financial year 2002/2003 could not be raised until the reconciliation process had taken place.  It was submitted by Mr. T. Ffrench on behalf of the Secretary that a debt could be raised and recovery proceedings could be instituted at any time during the year in question, subject to any re-adjustment which may become necessary upon reconciliation.  Mr. Ffrench submitted that the SSAT had erred in deciding that the calculation, raising and recovery of an overpayment based on a change in shared care could not be done until after the taxable income of the recipient was known for that year.

5.      The SSAT also decided that the recovery of any debt owing to the Commonwealth by Mr.  Edwards in relation to this matter should not be waived.  Mr. Edwards who appeared on his own behalf sought a review of that part of the SSAT’s decision.  He said that if the Secretary had not sought review of the SSAT decision, he would have done so himself in regard to the SSAT’s refusal to waive the debt.

6.      Maree Howard, the Second Respondent, did not attend the Tribunal hearing, nor has she made any submissions to the Tribunal.

BACKGROUND

7.      The facts which gave rise to this matter are not in dispute, nor is the calculation of the quantum of the debt.  The Tribunal makes the following findings of fact:

(a)Until 29 January 2002, Mr. Edwards had the care of his three children M, A and G.  He was paid FBT in respect of his three children.

(b)The three children left the care of Mr. Edwards on 29 January 2002.  His FTB ceased from that date.

(c)Mr. Edwards subsequently had a small share of the care of his children when they visited him. In about April 2002 he applied for FTB on the basis of this shared care.

(d)On 1 May 2002, FTB was reinstated for Mr. Edwards, from 29 January 2002 on the basis that he was sharing the care of his children with their mother, Ms. Howard, and that he had 11% of the shared care of each of the three children.  The allocation of 11% was based on information given to Centrelink by Mr. Edwards on 1 May 2002.  He said he had the children for one weekend per month and for seven (7) days at Easter.  He also said that he would not be getting the children for the school holidays again until he provided a legal document to say that he would return them at the end of the holidays.

(e)That assessment of 11% of the shared care of each of the three children remained in effect until 1 July 2002, and Mr. Edwards was paid FTB from 29 January 2002 until 30 June 2002 on that basis.

(f)In August 2002, a reassessment of shared care was made, increasing the percentage of Mr. Edward’s share to 18% for each of the three children, with effect from 1 July 2002.

(g)The increase to 18% was later disputed by Ms. Howard.  She claimed that Mr. Edwards was not taking advantage of the agreed contact time.

(h)On 24 February 2003, Centrelink contacted Mr. Edwards and told him that the care arrangements from 29 January 2002 were being reviewed.  He was asked to substantiate the times the children were with him.

(i)On 17 March 2003, Mr. Edwards advised Centrelink that he was behind in contact times due to work commitments but that the times would be made up by “make-up” contact.

(j)On 28 March 2003, Centrelink sent a letter to Mr. Edwards asking him to confirm details of the contact time with the children, including make-up contact, within 14 days.

(k)Mr. Edwards did not respond to the letter of 28 March 2003, within 14 days.  Centrelink made a new assessment, based on the information available to it, of Mr. Edwards’ contact with his children from 29 January 2002.  This assessment was:

M & G:           5% from 29 January 2002

9% from 1 July 2002

A:                   5% from 29 January 2002

14% from 1 July 2002

(l)A subsequent review of the shared care on the basis of the actual hours the children were with Mr. Edwards established the percentage agreed upon by the parties.  This assessment was:

29 January 2002 to 30 June 2002: M, G and A 8% of the time

1 July 2002 to 7 April 2003:           M & G 9% of the time

A 13% of the time

8. Where care of children is shared by, for example, parents who are not living together, family tax benefit payments payable to each parent are calculated on the basis of time spent with each parent. For the period 29 January 2002 to 30 June 2002, Mr. Edwards only had M, G and A for 8% of the time and was therefore not entitled to any FTB for that period. Section 25 of the FA Act precludes payment of FTB to those with less than 10% of the care of an FTB child. From 1 July 2002 to 7 April 2003, he was only entitled to FTB in relation to his 13% of shared care for A.

9.      Mr. Edwards did not dispute the recalculated percentages of care.  He did dispute the question of recovery of the debt.

10.     The issues for the Tribunal are:

·     Was the SSAT correct in deciding that any debt from 1 July 2002 could not be raised and recovered until after a “reconciliation” process which would have occurred after the end of the 2002/2003 tax year, when Mr. Edwards taxable income for the year became known, and

·     Waiver of the right to recover any debt.

CONSIDERATION OF THE ISSUES

11. The FA Act deals with matters such as qualification for family tax benefit, how shared care is worked out and how rates of payment are calculated. The FAA Act deals, amongst other things, with how claims are lodged and determined, the circumstances in which debts will be raised, and the processes for recovery and non-recovery of debts.

12.     The rate at which FTB is paid to a recipient depends on a combination of the number of children in the recipient’s care, the percentage of shared care and the recipient’s taxable income for the financial year in question.

13. Family tax benefit is paid either by instalments, on an ongoing fortnightly basis, or in a lump sum after the end of a tax year. A lump sum payment of family tax benefit is claimed through the tax system, when adjusted taxable income is known. Where a person is seeking ongoing payments by instalments, a determination is made under s.16 of the FAA Act. Section 16(2) provides:

“16(2)  If the Secretary is satisfied that the claimant is, at the time the Secretary makes the determination on the claim, eligible for family tax benefit… the Secretary must determine that the claimant is entitled to be paid family tax benefit for each day on which the determination is in force at the daily rate at which the Secretary considers the claimant to be eligible.”

14. Mr. Edwards was paid family tax benefit by instalments, pursuant to s.16 of the FAA Act. He was therefore required to give an estimate of income (s.20 of the FAA Act), to allow the rate of his payment to be calculated.

15.     The entitlement of a recipient to receive FTB, or the rate at which a recipient is paid FTB will be affected during the course of a financial year if there are changes to the number of FTB children in the person’s care, the percentage of shared care or a change in taxable income.  There is an onus on a recipient to notify Centrelink of any such change “as soon as possible” after the recipient becomes aware of the change, so that an adjustment may be made to the rate of FTB payments.

16. When Centrelink became aware (in April 2003), that Mr. Edwards’ share of care of the three children had been less than the percentage for which he had been paid, a determination was made which varied the rate of FTB payable to Mr. Edwards, retrospectively from 29 January 2002. This retrospective variation was done pursuant to s.31(1) and (2) of the FAA Act. Section 31(1) provides:

“S.31   Variation of instalment entitlement determination to reflect changes in eligibility:

(1)If:

(a)a determination is made under section 16 that a claimant is entitled to be paid family tax benefit by instalment; and

(b)       after the determination is made an event occurs;  and

(c)when the Secretary becomes aware of the occurrence, the Secretary considers that, if he or she were making the determination immediately after the occurrence, he or she would conclude:

….

(ii)that the claimant was still so eligible but that the rate of family tax benefit should be a different rate to the rate previously determined;

The Secretary must, subject to subsection (2):

….

(e)if subparagraph(c)(ii) applies – vary the determination so as to establish the different rate with effect from the date of occurrence.”

Section 31(2) allows for the new determination to be applied retrospectively.

17.     There was no need for the variation determination to take into account the taxable income of Mr. Edwards for the period 29 January 2002 to 30 June 2002, because he was not entitled to any of the FTB he received during that period, irrespective of income.

18.     Similarly the variation determination for the period 1 July 2002 to 7 April 2003, in relation to M and G was that Mr. Edwards was entitled to no FTB because the percentage of shared care was less than 10% for each of them, irrespective of income.

19. The variation determination for A (13% of shared care) proceeded on the basis of Mr. Edwards having a taxable income in line with his estimate. Section 31(1B) provides that the “event” for the purpose of the variation does not include an occurrence that causes the claimant to provide a revised estimate of the claimant’s adjusted taxable income.

20.     The result of the variation determination was that Mr. Edwards had been paid $1510.01 more than he should have been for the period 29 January 2002 to 7 April 2003.

21. The FAA Act also provides for variation determinations to increase the rate of FTB if the claimant has become entitled to an increase in FTB (s.31(2)). This section is not relevant in this case.

22. There is also a provision in the FAA Act (s.31A) which allows for a variation decision in relation to the rate of FTB when there is a change in the estimate of taxable income. This type of variation (resulting in increase or decrease) has prospective effect only. See section 31A(2). This section is also not relevant in this case.

23. Section 71(2) of the FAA Act allows for a debt to be raised if:

“(a)an amount (the received amount) has been paid to a person by way of assistance;  and

(b)the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;

the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.”

24.     This matter boils down to the question as to what is meant by the words “the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law” in s.71(2)(b) of the FAA Act quoted above. The SSAT took the view that the correct amount could not be determined until after Mr. Edward’s taxable income was known for the 2002/2003 financial year. The alternative view is that the correct amount is the amount which is determined to be applicable under the decision made after the most recent review. That is, the amount paid under a valid determination.

25. Section 105 of the FAA Act gives the Secretary the power to review a decision if satisfied that there is sufficient reason to review the decision. The Secretary may undertake such a review at any time and issue a new determination. The new determination may involve a rate increase or decrease and may be applied retrospectively. This review is often undertaken after the end of a financial year, when a claimant’s adjusted taxable income is known. A retrospective determination of entitlement may result in the recipient receiving a top up of FTB or it may result in a recipient incurring a debt. This is the process commonly known as reconciliation.

26. There is nothing in the FA Act or the FAA Act that limits the ability of the Secretary to perform a review at any time, and having done so, revise a rate determination.

27. The Secretary will not necessarily conduct a review at all if there is no new information available about the taxable income of a claimant based on an estimate (unless no tax return is lodged within the time stipulated in s.28 of the FAA Act). The so-called “reconciliation” review may in fact never occur.

28. In this case the Secretary has had cause to revise determinations previously made under section 31 of the FAA Act. The review has been conducted under section105 of the FAA Act.

29. Section 3(4) of the FAA Act provides that a reference to a “determination” is a reference to a determination as originally made or as varied. Section 21 of the FAA Act provides that a determination comes into force when it is made and remains in force at all times afterwards. Thus it follows that when new decisions were made at various dates about the level of shared care (T8, T9, T11, T27) these were decisions that affected the rate of FTB instalments and section 31 of the FAA Act applied to set a date of effect. From those determinations, subject to other matters such as income testing, it was possible to say, retrospectively, that the amount of FTB received by Mr. Edwards was ”greater than the amount (the correct amount) of assistance that should have been paid”.

30. Under general principles in this area of the law, a debt due to the Commonwealth arises by force of the operation of legislative provisions for liability, such as are provided for in section 72 of the FAA Act: Efstratiadis v Commonwealth (1990) 22 FCR 167; Secretary Department of Social Security v Alvaro (1994) 19 AAR 460. As these two cases state (though with reference to debt provisions of the Social Security Act), there are two separate decisions involved when recording a debt, firstly, and then in taking the decision to recover it.  The Court stated in Alvaro:

“… counsel for the applicant argued that s1224(1) operates of its own force so that where the factual circumstances prescribed in paras (a), (b) and (c) exist, there is a debt due to the Commonwealth without there being any administrative decision or step taken by an officer of the department.  In a sense that is correct, but no practical consequence flows from the mere statutory prescription that a debt exists.  Administrative processes are necessary to recognise and record that debt as a debit..”

31.     The Tribunal accepts the Applicant’s submission that the words of section 71 referring to the “received amount” being “greater than the amount (the correct amount) of assistance that should have been paid to the person” should be read in the context of the other provisions that allow new determinations to be made from time to time and in section 31 allowing a date of effect for a new determination to be fixed to the date of the “event” (or change of circumstances) referred to in section 16. The interpretation of section 71 that seems to have been favoured by the SSAT is that the use of the term “correct amount” in the section requires that it be known what the final “correct amount” of a FTB will with respect to any financial year.  This is not the case.

32.     The Tribunal accepts the submission that the term “correct amount” in section 71 should be read as the amount to be paid to a person under a valid determination. This interpretation puts no strain on the language of the section, accords with the provisions for FTB taken as a whole, and has the advantage of being administratively more workable than the interpretation placed on the section by the SSAT. If the debt could not be raised until after a reconciliation process once income details were known, the recovery of debts would be unnecessarily delayed, and may not be recovered at all. There is no reason for that delay to occur. The clear provisions of the FAA Act allow for a new determination about “the correct amount of assistance”  to be paid to a person, to be made, and there is no bar provided in the legislation for recovery to be effected from the time the debt comes into existence by force of the statutory provisions.   For these reasons the Tribunal sets aside the SSAT decision insofar as it stated that no debt for the period 1 July 2002 to 7 April 2003 could be raised.

WAIVER

33.     Mr. Edwards gave evidence to the Tribunal.  During the course of his evidence he made the following points:

·     When he attended interviews with Centrelink he told Centrelink officers about the way that care of the children was shared between himself and his ex-partner.  He said that the Centrelink officer told him that the percentages could be worked out on the basis of hours.  He stressed that it was always the Centrelink officer who worked out the percentages.  The percentages were their calculation, not his.  He told Centrelink he was falling behind in time spent with his children, but he proposed to make the time up before the end of the financial year.  He understood that Centrelink accepted this arrangement.

·     Mr. Edwards said that his previous employer was unco-operative about giving him time off for his children.  He has now left that employment and works as a taxi driver.  He earned about $17,000 last year from taxi driving.  He also works for a locksmith.  He pays $100 per week towards rent in a shared flat and about $100 per week on food.  He stopped claiming FTB last year because of the complexity of the system and the problems that he had.  Ms. Howard has taken the children to live near Maryborough.  He has not seen the children since Christmas.  He is unable to pay the cost of travel to see his children, nor can he pay for their travel and accommodation if they come to Brisbane to see him.

·     He does not own a car and has few household possessions.  He estimates that since 1999 he has spent $5,000 in order to see his children.  With regard to his financial circumstances he has recently paid $800 in traffic fines.  He has a child support debt of some $400, also arising from the changes in care.  He has some $2,800 in a bank account, about $1,300 of which was earmarked for personal tax payments and GST payments in relation to taxi driving.

34.     Mr. Ffrench conceded that Centrelink had made administrative errors in regard to working out the percentages of shared care. He submitted, however, referring to section 97(2) of the FAA Act, that there was no basis for non-recovery of the overpayment as the Respondent would not be in “severe financial hardship” if required to repay the debt. He submitted also that under section 101 there were no “special circumstances” that justified waiving any part of the debt.

35.     Mr. Edwards submitted that the debt should be waived because he had kept Centrelink fully informed about his circumstances, and provided the information on which Centrelink calculated the percentages and his FTB payment.  If the calculations were incorrect, he said it was their error not his, and he said that this was acknowledged by the authorised review officer.

36.     In Secretary, Department of Social Security v Hales (1998) 51 ALD 695 the Federal Court said (at p695):

“….From time to time in the administration of social security benefits, overpayments occur.  Sometimes these are the result of innocent non-compliance with the requirements of law which can be affected by the stress associated with the circumstances that led to the receipt of benefits in the first place.  The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned.  However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise.  There are provisions in the Act which recognise that reality.  They relate to the writing off and the waiver of debts otherwise due to the Commonwealth.”

37.     The matters taken into account in determining questions of waiver of a debt require balancing up the fact that an applicant has received public moneys without entitlement, with other considerations including whether this occurred innocently or by fraud; the person’s financial circumstances; the prospects of recovery; whether compromise is offered; and compassionate considerations, including financial hardship: Re Waller and Secretary Department of Social Security (1985) 8 ALD 26.

38.     Mr. Edwards’s debt arose in circumstances of innocent non-compliance.    The Tribunal accepts the evidence that Mr Edwards is on a low income and is in financial hardship, which affects his ability to maintain contact with his three children.  The Tribunal also accepts the evidence from the authorised review officer that in the period 29 January 2002 to 30 June 2002 “Centrelink staff did not correctly calculate matters though both (parents) agreed to care details” (T58).

39.     Thus the debt arose because of a combination of:

(a)Error on the apart of the officers of Centrelink in calculating the percentages of shared care during the period 29 January 2002 to 30 June 2002, and

(b)The difficulty which Mr. Edwards experienced in being able to have as much of the agreed contact as he had anticipated.

40. It cannot be said that the debt was attributable solely to administrative error, consequently section 97 of the FAA Act does not apply.

41.     Nevertheless, the Tribunal takes the view that there was a significant error in the calculation by Centrelink of the percentages of care in the period 29 January 2002 to 30 June 2002 and takes this error into account as one of the circumstances which makes this case special in the sense of unusual.

42.     The compassionate special circumstances include that Mr. Edwards sees his children little, due to his straitened financial circumstances.  The FTB debt when added to other debts he has incurred, impacts further on his ability to maintain contact with them.

43. The Tribunal decides that there are circumstances sufficiently special, pursuant to section101 of the FAA Act, to make it desirable to waive the right to recover the debt in relation to the period 29 January 2002 to 30 June 2002.

44.     The Tribunal sets aside the decision under review and in substitution decides that:

(a)John Edwards has a recoverable family tax benefit for the period 29 January 2002 to 7 April 2003;  and

(b)The right to recover the debt for the period 29 January 2002 to 30 June 2002 is waived.

I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Don Muller and Ms M Carstairs, Member

Signed:         .....................................................................................
           C. O’Donovan, Associate

Date/s of Hearing   10 February 2004
Date of Decision   19 May 2004
Applicant   Mr. T. Ffrench, departmental advocate
Respondent   Mr. Edwards, himself
Second Respondent                   No appearance