Flaskas and Secretary, Department of Family and Community Services
[2002] AATA 1255
•6 December 2002
DECISION AND REASONS FOR DECISION [2002] AATA 1255
ADMINISTRATIVE APPEALS TRIBUNAL )
) Q2002/519
GENERAL ADMINISTRATIVE DIVISION )
Re DIANNE FLASKAS
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Ms J Cowdroy, Member
Date6 December 2002
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
(Sgnd) J Cowdroy
Member
CATCHWORDS
SOCIAL SECURITY – overpayment – parenting payment – whether applicant failed to notify Centrelink of income – whether debt properly raised – whether debt should be recovered – administrative error - special circumstances
Social Security Act 1991
Re Duckworth and Secretary, Department of Social Security (1995) 39 ALD 674
Re Christensen and Secretary, Department of Social Security (1995) 37 ALD 795
REASONS FOR DECISION
6 December 2002 Ms J Cowdroy, Member
BACKGROUND:
By decision dated 5 June 2002, the Social Security Appeals Tribunal affirmed a decision made by Centrelink to raise and recover an overpayment of parenting payment in the sum of $6,958.58 for the period 20 June 2000 to 6 May 2001.
HEARING:
The matter was heard at Maroochydore on 23 September 2002. The applicant and her husband Mr P Flaskas gave evidence, as well as their accountant, Mr M Wood. Mr M Gillett, of Centrelink Maroochydore gave evidence for the respondent. The T-documents were admitted into evidence pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 and marked as Exhibit 1. Additionally, the following material was received into evidence:
Exhibit 2: Bundle of documents with covering letter from P Kanowski dated 10 September 2002;
Exhibit 3: Statement of Mr Gillett dated 18 September 2002;
Exhibit 4: Letter of Mr Wood dated 24 July 2002 and letter of Mr and Mrs Flaskas (signed by Mr Flaskas) dated 23 July 2002.
The matter was determined by reference to the oral evidence of the parties and their witnesses, the oral submissions of the parties and the tendered material.
Applicant:
Essentially, the applicant's submission is that though her husband and her accountant she had provided sufficient information to Centrelink to ensure that the amount of parenting payment she received was correct.
Mrs Flaskas gave evidence. She had given birth to twin boys in 1998, in respect of which she was in receipt of family allowance and parenting payment. She had never looked at the letters she received from Centrelink in connection with her continuing entitlement, other than in a cursory manner. Her husband, Peter Flaskas assumed responsibility for those matters and indeed, the entire financial aspects of the household.
However, she was familiar, in a general sense, with her obligation to notify Centrelink if certain events occurred. She was aware that her husband set up a business named Tropicana Tours, which was in joint names, in 1998. It involved taking persons from retirement villages to shows and other venues by bus.
The applicant is a director, together with her husband, of Flaskas Corporation Pty Ltd. She is also aware of the existence of a family trust, The Peter Flaskas Family Trust (hereinafter called "the Trust"). She acknowledged that the income and expenditure statement for the Trust for the year ended 30 June 2000 (T18-97) records a distribution of $22,783.09 to each of her and her husband, which she agreed was a significant distribution. She remembered signing whatever documents were put before her in relation to that distribution, the amount of which she believed had been determined by her husband in consultation with their accountant.
The obligation to report the family's ongoing financial circumstances to Centrelink was left in her husband's hands. Her husband sold a bus which was used in the operation of Tropicana Tours and she recalled him advising Centrelink of the proceeds of that sale. After that sale, her husband commenced in the real estate industry, and, as he was relying on commission for sales, there was very little money coming into the household.
The applicant acknowledged that if there were distributions of $30,000 made to her and her husband (comprising $22,783 distributions from the trust and $7,780 from the company), she would have expected that these would have effected her payments form Centrelink for the next 12 months. However, she had very little involvement in either the running of the business or its financial management as the care of her children kept her fully occupied.
10. Mrs Flaskas acknowledged that by the time she received the letter from Centrelink dated 19 April 2002 (T13-58), she would have been aware that the company had paid a distribution. However, she did not read the contents of the letter and, as was her normal practice, she passed it to her husband. The income recorded on that letter she either did not read, or if she did read it, she has no recollection of thinking that the amounts of income recorded were incorrect.
11. When pressed as to why she did not consider that there was an obligation imposed on her personally to notify Centrelink of the distributions, Mrs Flaskas responded that the family did not receive that money "in the hand", as a lump sum, as evidenced by the fact that the family needed parenting payment to survive financially. She understood that Centrelink had been provided with all relevant information about their finances, and, given that there was "very little money" coming into the household, there was no cause for her to think that she was receiving in excess of her entitlement to parenting payment.
12. The applicant acknowledged that the failure to disclose the existence of a family trust in T12-55 was in error. She remembered talking with her husband about the error once the debt was raised, but could not recall any discussion about that aspect at the time the form was completed.
13. Mr Flaskas stated that he had provided Centrelink with all the information about the family income. He contended that the amounts shown as distribution in the accounts were "an accountancy tabulation", "an amount distributed at accounting level". He acknowledged that Flaskas Corporation is trustee of the Trust. He acknowledged that the sum of $68,074.00 for "bus receipts" in the Income and Expenditure Statement of the Trust (T18-97) was received. In February or March 2000 the bus was sold and he received $32,000, which was most probably deposited into the joint account of P & D Flaskas. That amount was notified to Centrelink. The distribution of $22,783.09 each to himself and his wife was not determined until the end of the financial year ended 30 June 2000.
14. In respect to the failure to disclose the existence of a family trust in the document at T12-55, Mr Flaskas retorted that one "needed to be a rocket scientist to put in the figures". When pressed, he acknowledged that it was a simple matter to tick the box indicating that there was a family trust. He conceded that there had been a failure on his part to indicate that that was the case however he contended that it was an inadvertent error.
15. He referred to his letter to Centrelink at T30-158, in which he set out his understanding that "income calculation was held for the following 12 months" and that the amount paid by Centrelink was calculated on the basis of income tax returns which he had provided as well as information provided to his accountant. The letter at T13-58 addressed to Mrs Flaskas indicating that her partner's annual income was assessed at $14,7210.72, did not cause him any concern, despite the fact that there were distributions of $22,000 in June of that year as well as dividends.
16. Under cross-examination, he stated that most of the financial material had no relevance to him, and that he trusted his accountant to provide the relevant financial statements required by Centrelink. He acknowledged that the financial statements of the trust indicate that there was a $48,000 profit made in the financial year, and that the distributions of two amounts of $22,783.09 were not conveyed to Centrelink until March 2001. Those amounts were received in "dribs and drabs". He explained that when he did bus trips he received varying amounts of money, which he kept and used to support the family. That was the manner in which the distributions were received. He did not communicate to Centrelink that he received those monies.
17. Mr Wood, is a principal in Russell and Wood, accountants and advisers. He prepared the financial statements for the Flaskas family, including individual tax returns for the applicant, Mr Flaskas and the Trust. He thought that the Trust resolved to distribute the sum of $22,783.09 to each of the applicant and her husband in July 2000. He stated that it was likely that the income tax returns for the year 1 July 1999 to 30 June 2000, although undated, were prepared on 8 August 2000.
18. He had spoken to Mr M Gillett of Centrelink on 27 July 2000. He made a note at that time of the content of their conversation (Exhibit 4 refers). The matter of distributions from the Trust for the year ended 30 June 2000 was discussed. His notes record that Mr Gillett advised him that as Centrelink payments made during the year 30 June 2000 were based on taxable income received for the year ended 30 June 1999, trust distributions made on 30 June 2000 would not result in any adjustments being made. His understanding from that conversation was that the family trust could have received $100,000 and it would still not affect Centrelink payments. He also recorded Mr Gillett's advice to him that the system had changed from 1 July 2000 in that the Centrelink payments for the year ended 30 June 2001 would be based on estimates of taxable income for the year ended 30 June 2001. The estimates would then be compared with the actual taxable income received at the end of the financial year, and any adjustments being made at that time.
19. He acknowledged that the applicant, through her husband, relied on him to produce the financial statements, and left "everything to him".
Respondent:
20. Mr M Gillett, a customer service officer in the Family Assistance Office at Centrelink, Maroochydore, had prepared a statement in connection with this matter (Exhibit 3). He had read Mr Wood's statement, however he could not recall the conversation with Mr Wood. He acknowledged that if the discussion with Mr Wood related to parenting payment, then the information recorded by Mr Wood is correct, in that a distribution made in the 1999/2000 year would not normally be assessable income in that year, but would be assessable income for 12 months from Centrelink's receipt of the information. Usually, such information was provided in the form of an income tax return.
21. However, family tax benefit was introduced from 1 July 2000 and it replaced family payment. In respect to family tax benefit, the relevant tax year is the current tax year. Instead of basing a recipient's entitlement on the previous year's income, entitlements were based on the taxable income in the financial year in which payments were being made. Essentially, an estimate was provided which was then compared with the actual amount received at the end of the financial year.
22. Having read Mr Wood's statement, he considered it likely that the conversation with him initially revolved about parenting payment, but then digressed to family tax benefit, as it is only the method of assessment of that form of income support which changed from 1 July 2000. He pointed out that Mr Wood's letter does not make it clear whether the discussion was about parenting payment or family tax benefit.
23. There was no change to the method of calculating parenting payment. A distribution at the end of a financial year will effect parenting payment over the following twelve months. While there was a requirement that Centrelink had to be informed, the annual adjustments do not have to run July to July, and there is a certain amount of flexibility.
24. If he had been informed that there had been a distribution from a family trust, he would have sought further information, in particular the amount involved. Under cross-examination, he stated that in his conversations with Mr Flaskas, it was evident that Mr Flaskas never professed to understand how assessment of entitlement was calculated. He agreed that Mr Flaskas had always endeavoured to keep him informed of any information which might affect the family's entitlements to Centrelink payments. He could vaguely remember Mr Flaskas contacting him when he was to receive monies from the sale of a bus.
SUBMISSIONS:
25. Mr Flaskas, on behalf of the applicant submitted that there was no lack of communication with the respondent about the family's financial affairs. He emphasised that he contacted Centrelink on numerous occasions. He stressed that he had informed Centrelink of the commission he had received from his employment and the monies he received from the sale of a bus. He believed he had supplied all the information necessary for Centrelink to assess his wife's entitlement to family payment. He acknowledged that obligations are imposed by notice upon the recipient of a social security benefit personally, and he was not contending that such obligation was delegated to the accountant. However, he described himself as naieve when it came to financial matters.
26. He categorised the failure to disclose the existence of a family trust in the Parent Payment Review document as an inadvertent error. The payments were received in good faith.
27. Mr Kanowski, for the respondent, pointed to a gross profit for the year ended 30 June 2000 of $48,126.18. Whilst the income from the bus receipts was constant, the main reason for the increase in profit was the sale of an asset in the form of a bus, coupled with fewer expenses. Ultimately, there was approximately $48,000 available for distribution. Additionally, there was a distribution from Flaskas Corporation Pty Ltd of $7,780 to each of the applicant and Mr Flaskas for the 2000 financial year. The distribution from the Trust alone was sufficient to deny the applicant entitlement to parenting payment.
28. The evidence is that neither the applicant nor her husband received those amounts as lump sums. Rather they took the form of what is aptly described as drawings. In this context, the matters of Re Duckworth and Secretary, Department of Social Security (1995) 39 ALD 674 and Re Christensen and Secretary, Department of Social Security (1995) 37 ALD 795 were relevant. Both those matters held that the entry of a distribution in the books of a family trust constituted a distribution of income.
29. Mrs Flaskas acknowledged receipt of letters from Centrelink requesting her to notify Centrelink of any changes to the information recorded about her and her husband's income within 14 days of such change. In particular, T8-43 requires notification if the recipient or her partner received a lump sum amount, a one-off payment from any source or income from a trust. Clearly, the receipt of amounts from the Trust imposed an obligation on the applicant to notify Centrelink and this was not done.
30. Attention was also drawn to the letter to the applicant dated 20 June 2000 (T10-46), which was received by the applicant at about the time consideration was being given to declaring a dividend from the Trust. Given that there was no distribution in the previous financial year, a distribution of $22,783.09 to each of the applicant and Mr Flaskas must have been viewed as a significant increase.
31. Additionally, the letters at T11 and T13 record amounts of annual income for both the applicant and her husband which were considerably lower than the amounts received by the household in the form of drawings. It was only upon the receipt of Mr Flaskas' letter at T15-62 that the respondent became aware of the fact that there had been distributions made from the Trust during the financial year 2000. That letter was received by the respondent on 10 April 2001 and, after allowing for a reasonable time for processing that information, parenting payment was ceased with effect from 9 May 2001.
32. The issue for the Tribunal is whether Mr Flaskas notified the amounts of income adequately or effectively. The respondent's records reveal that Mr Flaskas contacted Centrelink on a number of occasions and provided information about a number of matters, including the fact that an asset was being sold and that $32,000 was paid into Flaskas Corporation Pty Ltd, and on 5 April 2000, Mr Flaskas advised that he no longer worked for Flaskas Corporation.
33. In respect to the conversation between Mr Wood and Mr Gillett, whilst Mr Wood was making a query about parenting payment, much of the conversation appears to relate to family tax benefit, suggesting that there may have been a "miscommunication". The evidence of Mr Gillett was that he would have been alerted if a specific figure had been mentioned. Unless the respondent was given a specific figure, it was clear that it would not have been in a position to assess the applicant's entitlement to parenting payment.
34. However, quite apart from the conversation on 27 July 2000, the failure by the applicant to indicate the existence of shares in a private company and a family trust, further prevented the respondent from being in receipt of the information necessary to make an appropriate assessment.
35. When effective communication was made, a re-calculation occurred on the basis that the applicant was taken to receive one fifty-second of that amount as ordinary income during each week in the 12 months commencing on the day on which she became entitled to receive that amount. Applying that formula, the fortnightly income of the applicant and Mr Flaskas resulted in the applicant being precluded from entitlement to parenting payment. From 30 June 2000 to 6 May 2001, the applicant received $6,958.58, which is a debt to the Commonwealth.
36. The debt did not arise from administrative error on the part of the respondent. In respect to the issue of good faith, the letters sent to the applicant record the income that was being used to assess the amount of entitlement. If those letters had been read, it would have been evident that the distribution from the Trust had not been taken into account.
37. Quite apart from the respondent's contention that the debt arose wholly, or if not, at least partly from the applicant's failure to notify, it was contended that there were no special circumstances which would warrant waiver of all or part of the debt, as the house in which Mr and Mrs Flaskas reside is unencumbered and repayment by $20 per fortnight is modest.
FINDINGS AND CONSIDERATION:
38. I find that the applicant and her husband, Mr P Flaskas were directors and shareholders in a company, Flaskas Corporation Pty Ltd. That company is the trustee of the Flaskas Family Trust. Mr and Mrs Flaskas are beneficiaries of the Trust, as well as their children, other family members and the Trustee Corporation.
39. Mr Flaskas provided information from time to time to Centrelink about the household's finances, including amounts he derived from employment and monies he received following the sale of an asset. I find that his accountant, Mr M Wood spoke to an officer of Centrelink, Mr M Gillett on 27 July 2000 and that the topic of distributions from the Trust was discussed. I am not satisfied that those discussions were of sufficient particularity to alert Mr Gillett to the need to ask for further information on that aspect.
40. Quite apart from that aspect however, there was an obligation placed on Mrs Flaskas to advise Centrelink if the amounts recorded as income in the letters she received from Centrelink, were not accurate or if other monies were received into the household.
41. The evidence of the applicant demonstrates quite clearly that she relied on her husband to ensure that such information was provided. To that extent, the applicant delegated those responsibilities. However, I do not understand the applicant's argument to revolve around that issue, and even if that was the case, there is authority to the effect that such obligations cannot be delegated in order to avoid liability.
42. Whilst I accept that Mr Flaskas endeavoured to acquaint Centrelink with all relevant matters, I find that during the financial year 1990/2000 the applicant and Mr Flaskas received the sum of $22,783.09 each in the form of drawings from the income of the bus touring enterprise. Additionally, there were amounts received from the company during the same financial year of $7,780 each. There was no evidence about the manner in which the amounts from the company were received. I find that the Trust distributions were not received in a lump sum. However, that does not alleviate the applicant from her responsibility to advise that such amounts were received, despite the fact that they were received "in dribs and drabs". I find that the respondent was not advised of the distributions from the Trust until 15 March 2001.
43. I find that from 20 June 2000 to 6 May 2001 the applicant was in receipt of parenting payment. During that period she received $6,958.58 to which she was not entitled. This is because of the operation of section 1073(1) of the Social Security Act 1991 (hereinafter referred to as "the Act") which states that "certain amounts" are taken to be received over 12 months:
"Subject to points 1067G-H5 to 1067G-H20 (inclusive), 1067L-D4 to 1067L-D16 (inclusive), 1068-G7AA to 1068-G7AR (inclusive), 1068A-E2 to 1068A-E12 (inclusive) and 1068B-D7 to 1068B-D18 (inclusive), if a person receives, whether before or after the commencement of this section, an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part; and
(b) is not:(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum."
44. In accordance with the principles outlined in Re Christensen, upon a resolution of the trustee in accordance with the trust instrument, income to a beneficiary is a distribution of income. The distribution did not fall within any of the exceptions to the rule expressed in section 1073(1) since the distribution did not constitute income in the form of periodic payments, nor was it ordinary income from remunerative work undertaken by Mr Flaskas. Whilst Mr Flaskas may have performed the work which permitted the payments to be made, ultimately they were made as a result of a resolution by the trustee and the drawings received by the applicant and her husband have the status of "loans".
45. Accordingly, section 1073 of the Act is to be applied which means that the amounts are taken into account as one fifty-second of the amount in each of the following fifty-two weeks commencing on the day on which the person becomes entitled to receive that amount. According to Mr Wood, the resolution to make the distributions occurred in July 2000.
46. Section 1223(1) of the Act, as it then was, states:
"Subject to subsection (1B), if an amount has been paid to a person by way of social security payment or fares allowance on or after 1 October 1997 and:
(a)the recipient was not qualified for the social security payment or fares allowance when it was granted; or
(b)the amount was not payable to the recipient;
the amount so paid is a debt due to the Commonwealth."
47. Applying the above provision, I find that the applicant received $6,958.58 to which she was not entitled. The applicant did not advise Centrelink of the distributions from the Trust to herself or her husband.
48. This brings me to consideration of the waiver provisions in section 1237A of the Act. In essence, it states that the Secretary must waive the right to recover the proportion of a debt that is attributable to an administrative error made by the debtor if the amount was received in good faith. I find that by not notifying Centrelink of the amounts received, the debt did not occur as a result of administrative error, and accordingly there are no grounds established to waive under this provision. It is therefore unnecessary to consider the issue of good faith.
49. The "special circumstances" provisions, as they are commonly known, occur in section 1237AAD of the Act. That provision only arises if a finding has first been made that the debt did not arise wholly or partly from the debtor's failure or omission to comply with a provision of the Act. Having found that the applicant failed to comply with her notification provisions, consideration of special circumstances does not arise.
50. Consequently, the decision under review is affirmed.
I certify that the 50 preceding paragraphs are a true copy of the reasons for the decision herein of Ms J Cowdroy, Member
Signed: .......................................................................
AssociateDate of Hearing 23 September 2002 (at Maroochydore)
Date of Decision 6 December 2002
The Applicant Appeared in Person
Solicitor for the Respondent Mr P Kanowski, Departmental Advocate
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