Edwards and Secretary, Department of Family and Community Services

DECISION AND REASONS FOR DECISION [2000] AATA 265

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q1999/1222

GENERAL ADMINISTRATIVE DIVISION       )
           Re      BARBARA EDWARDS
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Dr E K Christie, Member

Date20 March 2000
PlaceBrisbane

Decision The Tribunal affirms the decision under review.

...............(Signed).......................
DR E K CHRISTIE
MEMBER

CATCHWORDS
SOCIAL SECURITY – Overpayment of family allowance – whether withdrawal of superannuation is income – whether overpayment may be waived because of 'administrative error' or 'special circumstances'
Social Security Act 1991: ss 1237A(1), 1237AAD
Re Beadle v Director-General of Social Security (1984) 6 ALD 1
Re Groth v Secretary, Department of Social Security (unreported No. QG52/95 1 December 1995)
Re Milanovic and Secretary, Department of Social Security (AAT 3635, 19 November 1996)

ORAL REASONS FOR DECISION

20 March 2000 Dr E K Christie, Member

This is an application by Mrs. Barbara Edwards for a review of a decision made by the Social Security Appeals Tribunal ('the SSAT') on 15 October 1999 to raise and recover a debt of family allowance in the sum of $1,733.80 in respect of the period 14 August 1997 to 21 May 1998.
The reasons for this application, raised by Mrs. Edwards, were:

[that] the legislation has classed the same money [superannuation] twice as income;
[that] we earnt the money once [in preceding five years] we paid tax on it once, but Centrelink [has] used it twice to assess family payments; and
[that] we wish a review because the legislation does not accurately cover our situation and as a result we are being assessed unfairly.

The evidence before the Tribunal comprised the documents filed pursuant to section 37 of the Administrative Appeals Tribunal Act1975 (the T documents). The applicant was represented by her husband, Mr. A. Edwards. Mr. R. McQuinlan, a department advocate represented the Department of Family and Community Services ('the Department').
Mr. Edwards acknowledged the following findings of fact made by the SSAT (T2 Folio 6):

Mrs. Edwards was in receipt of a family allowance for her two children on the basis of her estimate of combined taxable income of $31,820 for the 1997/1998 financial year.
On 18 June 1998, Mr. Edwards received $5,930.83 as a withdrawal from his superannuation.
The Edwards' combined taxable income for 1997/1998 was $39,343.

The Edwards actual combined taxable income for 1997/1998 exceeded 110% of their estimate provided to Centrelink. A Data-matching Program Review (T21) matching Centrelink and Australian Taxation Office records revealed a possible discrepancy in combined taxable income.
ISSUES BEFORE THE TRIBUNAL
The only issue for the Tribunal to decide was whether the family allowance overpayments could be waived in part, or in full, because of 'administrative error' or for 'special circumstances'.
CONTENTIONS AND SUBMISSIONS OF THE PARTIES
Mr. McQuinlan, the Departmental Advocate, stated the reason for the difference between Mrs. Edward's estimate of income and the actual income, was due to the withdrawal of superannuation funds by Mr. Edwards. This withdrawal was made at the end of the 1997/1998 financial year as the Edwards family intended to migrate to New Zealand.
Mr. McQuinlan, said, for a particular financial year, that Centrelink based the amount of social security entitlements on the estimates of income provided by social security recipients.
Under the Social Security Act framework, Mr. McQuinlan submitted that Centrelink had no discretion to omit superannuation withdrawals from calculations of social security entitlements.
Mr. McQuinlan contended that there was no basis for waiving the debt, arising from family allowance overpayments, because of 'administrative error' as Centrelink had paid Mrs. Edwards' family allowance entitlements in accordance with the estimates of income she had provided. Furthermore, he contended that the incorporation of superannuation funds as part of the Edwards' actual family income was not, in itself, an 'administrative error'.
In relation to waiver under the 'special circumstances' provision of the Social Security Act, Mr. McQuinlan acknowledged that there was no suggestion that Mrs. Edwards had made a false statement or representation to Centrelink. However, he contended that there was nothing in the facts of Mr. Edwards' case which warranted the description 'unusual', 'uncommon' or 'exceptional' which met the meaning outlined in Re Beadle v Director-General of Social Security (1984) 6 ALD 1.
Mr. Edwards contended that the outcome for them in having family allowance overpayments made to them was an unintended consequence of the legislation. Money earned over a five year period outside the 1997/1998 financial year ie the superannuation withdrawal, was being used 'twice' in determining the amount of their family allowance entitlements.
Mr. Edwards contended that Centrelink had made many mistakes which made it difficult for them to comply with Centrelink obligations. He referred to a series of Centrelink documents (T11; T14; T15; T19; T26) which had the wrong financial year inserted. In addition, he said that Centrelink had provided wrong advice on their eligibility for family allowance for the situation when they had moved to New Zealand. Mr. Edwards submitted that more accurate information from Centrelink was required to ensure social security recipients, such as the Edwards family, were in a position to understand and to comply with their social security obligations in order to avoid punishment.
Mr. Edwards queried the accuracy of the calculations used by Centrelink to determine their social security entitlements. He cited two such examples, in which the amount of family allowance they received over the relevant period, varied by $146.
Mr. Edwards concluded by stating that he and the applicant had done everything possible in order to comply, as social security recipients, with Centrelink's requirements. However, Centrelink had created difficulties for them in not providing advice on their statutory obligations in a way that was easily understood.
CONSIDERATION OF THE ISSUES
The objective of the Tribunal is to review administrative decisions on their merits and in accordance with the law at all times. The relevant legislation is the Social Security Act 1991 ('the Act').
Section 885 of the Act provides for recalculation if income exceeds 110% of estimated amount. Section 1223(3) of the Act provides that overpayment due to recalculation, inter alia, for under-estimate (section 885), is a debt due to the Commonwealth.
Section 1237 of the Act provides for circumstances where a debt due by a recipient of social security to the Commonwealth, may be waived:
"SECTION 1237A – WAIVER OF DEBT ARISING FROM ERROR
1237A(1) Administrative error. 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.
Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
SECTION 1237AAD – WAIVER IN SPECIAL CIRCUMSTANCES
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 from the debtor or another person knowingly:
(i)making a false statement or a false representation; or
(ii)failing or omitting to comply with a provision of this Act or the 1947 Act; 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 accepts that Mr. Edwards believed that her husband's superannuation withdrawal would not affect her family allowance entitlements. However, the Tribunal finds no grounds to waive the debt under the 'administrative error' provisions of the Act as Mrs. Edwards has contributed, in part to the administrative error. In this regard, the Tribunal agrees with the reasoning in Milanovic v Secretary, Department of Social Security (AAT 3635, 19 November 1996) that is, the payment of family allowance is dependent on 'taxable income' which is defined in section 23(1) of the Social Security Act as:
"'Taxable income' has the same meaning as in the Income Tax Assessment Act."

Centrelink has no discretion as to what constitutes taxable income beyond this definition. Consequently, the Edwards' combined taxable income for the financial year, assessed in accordance with the Income Tax Assessment Act, was $39,343 – which was more than 110% of the estimate of $31,820 provided to Centrelink by Mrs. Edwards. As such, it represented a 'notifiable event' as set out in the Centrelink notification notice (T10, Folio 39, 6 August 1997). However, no such notification was made by Mrs. Edwards, leaving Centrelink no other alternative than to base payments of family alllowance on an incorrect estimate of combined taxable income.

In Groth v Secretary, Department of Social Security (Unreported, No. QG52/95, 1 December 1995), Kiefel J. considered whether 'special circumstances' applied in a case involving s.1184 of the Act. Kiefel J endorsed the approach adopted by the Administrative Appeals Tribunal at first instance; namely, in determining whether a person's circumstances are 'special', one should look at the effect upon the claimant if the waiver provision were not applied. If the consequence was unintended by the legislation, or the effect on the person concerned was different from that which would be felt by others, then the circumstances may be "special".
The Tribunal concludes that the effect of the superannuation withdrawal on Mrs. Edwards' family allowance entitlements is not one unintended by the legislation; nor is the effect upon Mrs. Edwards different from that which would be felt by others. Mrs. Edwards has endured the same consequence as any other social security recipient who receives an unintended lump sum payment eg. superannuation, retrenchment pay, long service leave, during the period social security entitlements are received, such that actual income for the financial year differs from their estimate. Accordingly, the debt cannot be waived under the 'special circumstances' provisions of the Act.
Whilst this conclusion may seem harsh, it would be fairer to say the outcome is unfortunate. The outcome is dependent on the legislation, but the legislation provides the Tribunal no discretion from which to depart. The Tribunal makes the observation that Mrs. Edwards' case, unfortunately, is not the first case before this Tribunal, where lump sum payments have created an equivalent problem ofr overpayments.
For all of the above reasons the Tribunal has no option other than to affirm the decision under review. However, because of the current financial status of Mrs. Edwards' family, specifically:

Their recent return and settlement in Australia;
The establishment of a new shoe repair business by Mr. Edwards under the NEAT Scheme; and
Mrs. Edward's present search for employment;

as well as, the beneficial nature of the legislation, the Tribunal directs that recovery of the debt be suspended for a period of twelve months from the date of this decision to facilitate financial stability in the Edwards' household. From this date the recovery of overpayments should be determined on the basis of a Statement of Financial Circumstances prepared by Mrs. Edwards.

In addition, the Tribunal makes a further direction that Centrelink now recalculates the Edwards' family allowance entitlement and, in turn, ensures that the amount of overpayment accrued over the period 14 August 1997 to 21 May 1998 is correct before recovery by instalments commences.
For all of the above reasons the decision under review is affirmed.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Dr E K Christie, Member
Signed:         .....................................................................................
           B. Hitchcock, Secretary
Date/s of Hearing  20 March 2000
Date of Decision  20 March 2000
Applicant  Mr. A. Edwards
Respondent  Mr. R. McQuinlan, Departmental Advocate

[2000] AATA 265

20 March 2000

Key Legal Topics

Areas of Law

Administrative Law

Legal Concepts

Administrative Error

Waiver of Debt

Special Circumstances

Recalculation of Income