Gadsby; Secretary, Department of Families, Community Services and Indigenous Affairs and

[2007] AATA 1953

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1953

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/1009

GENERAL ADMINISTRATIVE DIVISION		)
Re		SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Applicant

And ROMMIE GADSBY

Respondent

DECISION

Tribunal Ms Naida Isenberg, Senior Member

Date14 November 2007

PlaceSydney

Decision The decision under review is set aside, and in substitution therefor the Tribunal decides that a debt of $2,007.60 should be recovered from the Respondent.

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

Ms Naida Isenberg
  Senior Member      

CATCHWORDS

SOCIAL SECURITY – family tax benefit – adjusted taxable income exceeded cut out amount during the year – whether entitled to family tax benefit – incursion of debt – should debt be waived – decision set aside

A New Tax System (Family Assistance) Act 1999 - sections 21, 22, 22A

A New Tax System (Family Assistance) (Administration) Act 1999 - sections 31, 71, 97, 101 and 105

Re Secretary, Department of Family and Community Services and Tough (2002) 71 ALD 458

Secretary, Department of Family and Community Services and Humphreys [2003] AATA 527

REASONS FOR DECISION

14 November 2007 Ms Naida Isenberg, Senior Member        

DECISION UNDER REVIEW

1.      This is an application by the Secretary, Department of Families, Community Services and Indigenous Affairs (“the Applicant”) for review of a decision made by the Social Security Appeals Tribunal (“SSAT”) on 28 February 2007. The SSAT decided to set aside a decision made by Centrelink on 5 October 2006 to raise and recover a debt of $2,007.60 for overpayment of family tax benefit (“FTB”), incurred in the 2005/2006 financial year, from the Respondent (“Ms Gadsby”). In substitution of that decision, the SSAT found that there was no debt incurred for payments made in the period 1 July 2005 to 17 November 2005.

BACKGROUND

2.      Ms Gadsby received FTB for her twin children, Ashleigh and Gene, who were born on 6 April 1987. In 2005, Ashleigh and Gene were full-time students undertaking their higher school certificate (“HSC”).

3.       Ms Gadsby was advised through various notices that she was required to notify Centrelink if her FBT children were likely to have an adjusted taxable income (“ATI”) equal to or above stated amounts in a current income year. The notices sent in 2005, being the year that Ashleigh and Gene were completing their HSC, identified the stated amount as $10,948.

4.      On 22 November 2005, Ms Gadsby advised Centrelink that Gene and Ashleigh had finished their schooling, and requested deferment of FTB for both children as she did not want to have an overpayment of FTB.  At that time, Ms Gadsby was unable to provide an estimate of ATI for Gene, as he had not yet confirmed his post HSC employment. She estimated Ashleigh’s ATI to be approximately $11,000.

5.      On 5 October 2006, Ms Gadsby advised Centrelink that Gene’s ATI for the 2005/2006 financial year was $17,484, and that Ashleigh’s ATI for the same period was $13,868. Given that Ashleigh and Gene’s income for the 2005/2006 financial year exceeded the relevant stated amount to qualify as dependant children for FTB purposes, Centrelink decided that neither child was an FTB child in that period. Therefore, Ms Gadsby was not eligible to receive FTB for any of the 2005/2006 financial period, and had incurred a debt to the Commonwealth of $2007.60 for payments she had received during the period 1 July 2005 to 17 November 2005.

6.      On 12 October 2006, Ms Gadsby requested that the debt be waived, and on 29 January 2007, an Authorised Review Officer (“ARO”) affirmed the original decision.

7.      On 28 February 2007, the SSAT set aside the decision under review and substituted a new decision that there was no debt for the period 1 July 2005 to 17 November 2005. In making this decision, the SSAT found that only the FTB paid to Ms Gadsby after Ashleigh and Gene’s ATI passed the cut-out amount should be a debt to the Commonwealth.

ISSUES BEFORE THE TRIBUNAL

8.      The issues to be determined in this matter are:

·     Whether either of Ms Gadsby’s children (Ashleigh and Gene) was an FTB child in the 2005/2006 financial year, and if not, whether Ms Gadsby has incurred a debt to the Commonwealth; and

·     If a debt has been incurred, whether there are any grounds to waive some or all of the debt.

LEGISLATIVE FRAMEWORK

9.      The relevant legislation is found in the A New Tax System (Family Assistance) Act 1999 (“the FA Act”), and the A New Tax System (Family Assistance) (Administration) Act 1999 (“the Administration Act”).

10. In determining whether either of Ms Gadbsy’s children was an FTB child in the relevant period, it is necessary to consider sections 21, 22 and 22A of the FA Act.

11. Section 21 of the FA Act sets out the circumstances in which an individual is eligible for FTB. It states that an individual is eligible for FTB if that individual has at least one FTB child, is an Australian resident and has an FTB rate that is greater than nil.

12. Eligibility for FTB at any given point in time is dependent on whether the child is a FTB child. Section 22 of the FA Act outlines those conditions necessary for a child to be considered an FTB child for the purpose of paying FTB to an individual. Subsection 22(2) most closely resembles Ms Gadsby’s situation in respect to her children, and provides, so far as is relevant that:

22  When an individual is an FTB child of another individual

…

Individual aged under 18

…

(2)       The individual is an FTB child of the adult if:

(a)       the individual is aged under 18; and

(b)       the adult is legally responsible (whether alone or jointly with someone else) for the day‑to‑day care, welfare and development of the individual; and

(c)       the individual is in the adult’s care; and

(d)the individual is an Australian resident … or is living with the adult.

13. However, the operation of section 22 is modified by section 22A of the FA Act, and specifies circumstances in which, despite the provisions of section 22, an individual cannot be the FTB child of another. Specifically, as is applicable in this case, an individual is not an FTB child if the individual is aged 16 or more and has an ATI, for the income year in which the particular time occurs, that equals or exceeds the cut-out amount. Subsection 22A(2) of the FA Act defines the income cut-out amount, which in the 2005/2006 period, was $11,233.

14. Section 71(1) of the Administration Act provides that if a person is paid more FTB than their entitlement, the overpaid amount is a debt due to the Commonwealth:

“71(1)  If:

(a)an amount has been paid to a person by way of family tax benefit, maternity payment or maternity immunisation allowance (the assistance) in respect of a period or event; and

(b)the person was not entitled to the assistance in respect of that period or event;

the amount so paid is a debt due to the Commonwealth by the person.

15. Section 97 of the Administration Act concerns the waiver of debts solely attributable to administrative error:

“97(1)The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.

(2)      The Secretary must waive the administrative error proportion of a debt if:

(a)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and

(b)      the person would suffer severe financial hardship if it were not waived.

…”

16. The Administration Act also makes provision for waiver in special circumstances. Section 101 provides:

“101 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 the family assistance law; 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.”

17. Section 31 of the Administration Act was applied by the SSAT in its decision that Ashleigh and Gene did not cease to be FTB children until the time at which their ATI equalled or exceeded the limit of $11,233. Section 31 provides:

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:

(i) that the claimant was no longer eligible for family tax benefit; or

(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):

(d) if subparagraph (c)(i) applies—vary the determination so that the claimant is not entitled to be paid family tax benefit with effect from the date of occurrence; and

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

…

SUBMISSIONS

18. The Applicant submitted that the SSAT had erred in its conclusion that Ashleigh and Gene were FTB children until the point in time when their actual earnings reached the cut-out amount. Instead, the Applicant submitted that neither child was an FTB child of Ms Gadsby in the relevant period because both their incomes exceeded the cut-out amount for the relevant period. According to the Applicant, this is because the effect of section 22A of the FA Act is that a child who has received more income than the cut-out amount cannot be an FTB child for the entire income year in which the child’s income exceeds the cut-out amount. As a result, if a claimant is paid FTB in instalments and the child’s ATI exceeds the cut-out amount during the relevant income year, even if the claimant (as was the case with Ms Gadsby) advises Centrelink to cease making payments once the ATI amount has been reached, the claimant will have been overpaid and a debt will be raised.

19.     In support of this submission, the Applicant relied on the decision of Deputy President Forgie in Re Secretary, Department of Family and Community Services and Tough (2002) 71 ALD 458 (“Tough”), which was followed by Senior Member Bell in Secretary, Department of Family and Community Services and Humphreys [2003] AATA 527. The position taken by the Tribunal in Tough was that a child cannot be an FTB child of an individual at any time in an income year in which the child’s income exceeds the cut-out amount.Deputy President Forgie stated at 468 that:

… the effect of s 22A of the FA Act is that Brent cannot be Mrs Tough's FTB child at “a particular time” if his adjusted taxable income for “the income year in which the particular time occurs” exceeds the cut-out amount. [Emphasis added]

20. The Applicant also submitted that section 31(1)(d) of the Administration Act, upon which the SSAT relied in making its decision, only concerned a person’s entitlement to be paid instalments at a particular time during the income year based on current knowledge, and does not concern a person’s overall or reconciled entitlement for the whole financial year. It was also the Applicant’s submission that in making its decision, the SSAT appeared to have overlooked the power of the Secretary to review a decision at any time under section 105 of the Administration Act. In making this submission, the Applicant again referred me to the DP Forgie’s decision in Tough.

21.     Ms Gadsby understood that a debt may be incurred if the FTB payments continued after her children’s ATI reached the cut-out amount. However, Ms Gadsby stated that there was no indication from Centrelink what the consequences of Ashleigh and Gene earning over the cut-out amount would be. Although the Centrelink letters stated that she must advise if her dependant child’s income was likely to go over the cut-out amount, they did not say what the consequence of exceeding that amount would be – namely, that all the payments made to her for the whole financial year, and not just those made after Ashleigh and Gene reached the cut-out amount, would be recovered. 

22.     Ms Gadsby also stated that in accordance with the advice she had received from Centrelink, she notified the Department in November 2005, when Ashleigh and Gene finished school, that she expected their income may exceed the cut-out amount and asked for the payments to stop because she did not want to have an overpayment. Ms Gadsby said that there was no way that she could predict what her children’s ATI was going to be when the FTB payments for the relevant period commenced.  At that time they were still at school. Their ATI would only be known at the end of the tax year.

CONSIDERATION

23.     In coming to the correct and preferable decision, I took into consideration the relevant legislation, case law and submissions by the Applicant and Respondent.

24.     I also had regard to the decision of Deputy President Forgie in Tough, the facts of which were very similar to those currently under review. In considering whether the Respondent in Tough should be regarded as ineligible to receive payments for the whole of the relevant financial year, Deputy President Forgie stated at 467 to 468:

36. That brings me back to the two ways in which a determination can be altered and first to s. 31… It applies where a person is entitled to be paid FTB by instalment under a determination made under s. 16 and there then occurs an event which, if the Secretary were then making a determination, would cause him to conclude that the claimant was no longer eligible for FTB.  The date of effect of the determination is the date of the occurrence.

37. In Mrs Tough’s case, a determination had been made under s. 16 that she was entitled to be paid by instalment. If s. 31 applies, the event must have occurred after the date of that determination.  The only event that could be said to have occurred after that date and that would lead the Secretary to conclude that Mrs Tough was no longer eligible for FTB has been that her sons’ adjusted taxable income exceeded the cut-out amount.  Each ceased to be an FTB child as a consequence although at different times of the financial year.  If that is the case, the Secretary must vary the determination so that Mrs Tough was not entitled to be paid FTB.  As the date of effect of the varied determination is the date of the event and as the event must have occurred after the varied determination was made, the date of effect must have been the date on which their adjusted taxable income exceeded $7,633.  It is not the date of the beginning of the financial year for at that time, Mrs Tough’s sons adjustable taxable income had not exceeded the cut-out amount.

…

39. If the Secretary’s decision has been made under s. 31 and if no other provision of the FAA Act were relevant in this case, it would follow that Mrs Tough’s entitlement to FTB could not cease until her sons’ adjusted taxable income reached the cut-out amount of $7,633.  Only amounts paid after those dates would be amounts to which Mrs Tough would not be entitled and which would be a debt due to the Commonwealth. 

40. There is, however, the second avenue by which the Secretary may alter the decision and that is through a review of the earlier decision. The Secretary may do so pursuant to s. 105. The delegate’s decision of 22 May 2001 … does not refer to s. 105 and nor does it refer to s. 31. Despite that, I consider that it is a decision made under s. 105. It has three features: first, it states that Brent’s income level exceeded the “child income limit”; second, it purports to deal with Mrs Tough’s entitlement for the whole of the year; and third, it raises a debt for the whole of that period. A decision with those features is not consistent with a decision under s. 31 for a decision under s. 31 could only have affected the payment of FTB from the date of Brent’s income exceeding the cut-out amount. It could not have affected the amount of FTB paid to Mrs Tough prior to that date. A decision under s. 105, however, could have that effect for it may be substituted for the original decision and so affect FTB paid after the date of effect of the original decision i.e. 1 July, 2001.

41. In using his power under s. 105 to review a determination that Mrs Tough was entitled to FTB, it is proper for the Secretary to consider her eligibility and to do so in light of facts that had happened up to the date of his decision if those facts affected her eligibility on or after 1 July, 2001. 

25.     I agree with the Respondent that there is no way to predict with any certainty what an individual’s ATI will be until the end of the financial year.  For example, a person’s deductions are not likely to be collated until after the end of the tax year.  I am sympathetic in relation to the difficulty that the legislation may create. In particular, I agree that the effect of the legislation is problematic because it may create a situation where a claimant of FTB, who reasonably cannot estimate and/or predict their child’s ATI at the beginning of the tax year, has two options – they can either take the risk that their child’s ATI will be below the cut-out amount, and if it isn’t, then repay the debt, or not claim the FTB until the end of the income tax year when their child’s ATI is known with certainty.  Neither option is ideal.

26.     Furthermore, I acknowledge the unfairness of a parent incurring a debt as a result of their child having earned ATI above the threshold.  The Act quaintly makes some assumptions, it seems, to the effect that the child will make some retrospective contribution to his or her upkeep during the earlier period of the year during which they were at school.  But this is not always the case, and ultimately it is the parent who is liable for the debt.

27.     However, that being said, I must agree with the interpretation adopted by Deputy President Forgie in Tough and followed by Senior Member Bell in Humphreys. 

28. For this reason, I can only conclude that Ashleigh and Gene’s ATI for the 2005/2006 financial period exceeds the cut-out amount, and therefore they are not FTB children for the purposes of the legislation. Therefore, Ms Gadsby was not entitled to an FTB payment in respect of Ashleigh and Gene for the relevant period. Accordingly, the whole amount paid to Ms Gadsby for the relevant period is a debt due to the Commonwealth pursuant to section 71 of the Administration Act.

Should the debt be waived?

29. I now need to consider whether recovery of the debt should be waived. Section 97 of the Administration Act provides for waiver in the case of sole administrative error by the Commonwealth, but there was contention in that regard. As to whether there are special circumstances to waive the debt I note Ms Gadsby is a single mother who has received limited financial assistance from her ex-husband in raising her two children. However, given that both children have finished school (only one child still lives at home), Ms Gadsby is currently employed full time as the manager of a doctor’s surgery, and has recently purchased her own home, I do not believe that Ms Gadsby would suffer undue financial hardship if the debt was not waived. She and her children are in good health. She could suggest no other aspect of her circumstances to be “special” so as to attract the benefit of section 101.

30.      I therefore conclude that recovery of the debt should not be waived.

DECISION

31.     For the reasons stated above, the decision under review is set aside and in substitution therefor the Tribunal decides that a debt of $2,007.60 should be recovered from the Respondent.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Ms Naida Isenberg, Senior Member

Signed:..........[Skye Owen].............................
  Associate

Date/s of Hearing  16 October 2007
Date of Decision  14 November 2007
Solicitor for the Applicant          Mr Gary Richardson        
Solicitor for the Respondent     Self-represented