Galvin; Secretary, Department of Social Services and (Social services second review)
[2017] AATA 1218
•1 August 2017
Galvin; Secretary, Department of Social Services and (Social services second review) [2017] AATA 1218 (1 August 2017)
Division:GENERAL DIVISION
File Number(s): 2016/3666
Re:Secretary, Department of Social Services
APPLICANT
Salli GalvinAnd
RESPONDENT
DECISION
Tribunal:Mr D. J. Morris, Member
Date:1 August 2017
Place:Perth
The Tribunal sets aside the decision under review and, in substitution, affirms the original decision that the Respondent is not entitled to Family Tax Benefit supplements and top ups for the 2013/2014 financial year.
...............[sgd]....................................................
D. J. Morris, Member
CATCHWORDS
SOCIAL SERVICES – Family Tax Benefit (FTB) – whether respondent entitled to FTB top ups and supplementary amounts – late lodgement of tax return – whether respondent prevented from lodging tax return in relevant income year – whether special circumstances applicable – two part test – decision of SSCD Division set aside and new decision made – not entitled to FTB – original decision affirmed
LEGISLATION
A New Tax System (Family Assistance) Act 1999, Sch 1, cls 3, 25, 29
A New Tax System (Family Assistance)(Administration) Act 1999, ss 32A, 32C
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 44 AAR 436
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Services and Willersdorf [2016] AATA 535REASONS FOR DECISION
D. J. Morris, Member
1 August 2017
Background
The Secretary of the Department of Social Services (‘the Applicant’) seeks a review of the decision of the Social Security and Child Support Division of the Administrative Appeals Tribunal (‘AAT1’) of 7 June 2016 which set aside the decision of the Authorised Review Officer of 17 March 2016 and decided:
that due to special circumstances preventing lodgement of the applicant and her partner’s income tax returns, that the time limit for lodgement of tax returns for the 2013/2014 financial year is extended to the date of 23 July 2015 in this case, and that top up and supplements of FTB should be paid.
The hearing was held on 10 June 2017. The Applicant was represented Ms Sharon Sangha. The Respondent represented herself, made submissions and was cross-examined.
The Tribunal considered documents submitted by the Applicant under section 37 of the Administrative Appeals Tribunal Act 1975 (‘T’ documents). The Applicant also submitted:
·a 93 page set of T documents (T1 to T16) (T1);
·supplementary section 37 documents (marked ST1), which were admitted as Exhibit A1; and
·Statement of Facts, Issues and Contentions lodged on 28 October 2016 with annexed a letter from W. L. Fulcher of Ford Partners Pty Ltd, certified practising accountants, dated 30 September 2016 (Exhibit R1).
Mrs Galvin lodged a document responding to the Secretary’s Statement of Facts, Issues and Contentions, which was received on 25 November 2016 (Exhibit A2).
Facts
A person’s eligibility for FTB payments is determined pursuant to Part 3 of A New TaxSystem (Family Assistance) Act 1999 (‘the Act’) by application of Schedule 1 to that Act.
Clauses 3 and 25 of Schedule 1 provide for the inclusion of a Part A supplement in how the rate of FTB Part A is calculated and clause 29 provides for the inclusion of a Part B supplement in the calculation of FTB Part B.
Section 32A of A New Tax System (Family Assistance)(Administration) Act 1999 (‘the Administration Act’) requires that the Secretary of the Department of Social Services disregard the amounts of the FTB supplements when making or varying a determination until the claimant has, in the words of the statute “satisfied the FTB reconciliation conditions” which apply in the relevant period.
Section 32C of the Administration Act provides that an individual must lodge his or her tax returns within the first income year after the relevant income year unless the Secretary is satisfied that there are special circumstances that prevented the individual from lodging the return before the end of that first income year.
Common ground
In this matter the following was common ground between the Applicant and Respondent:
(a)The Respondent was receiving FTB by way of fortnightly instalments from the Department during the 2013/2014 financial year.
(b)On 8 May 2013, the Department sent Mrs Galvin a letter inviting her to update her family income estimate for the 2013/2014 financial year prior to 30 June 2015 and setting out the consequences of failing to comply with this requirement. This letter was at T9, pp. 53-54. The letter states that if no action was taken by Mrs Galvin and her partner by 30 June 2015, she would no longer be eligible for any further FTB, including the FTB supplements for the 2013/2014 financial year, and she would have to repay all the FTB received for the 2013/2014 financial year, and she would no longer be able to receive FTB payments fortnightly.
(c)On 25 March 2015, the Department sent Mrs Galvin a letter (T9, pp. 53-54) stating:
To make sure you received your full Family Tax Benefit entitlement, you and your partner need to lodge a 2013-2014 tax return, or tell us if you and/or your partner are not required to lodge a tax return, by 30 June 2015.
(Emphasis in original.)
(d)On 23 July 2015, Mrs and Mr Galvin lodged their tax returns for the financial year 2013/2014.
(e)On 16 December 2015 the Department undertook a reconciliation of Mrs Galvin’s entitlement to FTB payments and on the same day wrote to advise her that she had already been paid the balance of the FTB to which she was entitled, a sum of $10,412.84 for the 2013/12014 financial year (T10, pp. 56-57). This decision (the ‘original decision’) was based on the fact that Mr and Mrs Galvin had not lodged their 2013/2014 returns by 30 June 2015.
Mrs Galvin sought a review by an ARO, an officer of the Department not involved in the original decision. On 17 March 2016 the ARO spoke to Mrs Galvin. The ARO’s notes (T13, p. 65) record:
“Customer advised the reason for not lodging her 2013/2014 income tax return by 30 June 2015 was solely due to her accountant lodging her return by this date, after she provided all required information to her accountant in May/June 2015.”
The ARO decided that the circumstances outlined by Mrs Galvin were not special circumstances which would allow the discretion in the legislation to be enlivened and an extension of time for lodgement of the tax returns allowed. The ARO wrote in a letter dated 17 March 2016 (T12, p. 62):
“You advised me that you gave the information to the accountant in time, however he did not work on it straight away and it was lodged late. The legislation, however, requires that the 2013/2014 tax return be lodged with the ATO by 30 June 2015 which is different to lodging your return with your tax agent prior to 30 June 2015.
The failure of a person’s accountant to lodge their client’s tax return by the due date is not unusual and generally cannot be considered as a special circumstance. If you believe your accountant was negligent in not submitting your tax return by the due date you may wish to discuss this matter with them and seek recourse.”
Question before the Tribunal
The point at issue in this review is whether the provisions in section 32C of the Administration Act are applicable to Mrs Galvin. In other words, can she avail herself of the provisions set out in that section to receive the FTB supplements and top-ups for the 2013-2014 income year because “special circumstances that prevented lodgement of her tax return” are demonstrated?
The applicable law
Section 32C of the Administration Act states:
Relevant reconciliation time – first individual must lodge tax return
(1)This section applies to the first individual for a same-rate benefit period if:
(a)The first individual is or was required to lodge an income tax return for the relevant income year; and
(b)Clause 38L of Schedule 1 to the Family Assistance Act did not apply to the first individual at any time during the same-rate benefit period.
(2)Disregard paragraph (1)(b) if the first individual was a member of a couple at any time during the same-rate benefit period.
(3)The relevant reconciliation time is the time when an assessment is made under the Income Tax Assessment Act 1936 of the first individual’s taxable income for the relevant income year, so long as the first individual’s income tax return for the relevant income year was lodged before the end of:
(a)the first income year after the relevant income year; or
(b)such further period (if any) that the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the first individual from lodging the return before the end of that first income year.
(4)The further period under paragraph 3(b) must end no later than the end of the second income year after the relevant income year.
What happened?
Mrs Galvin set out her contentions in her submission (Exhibit A2). She said that she received a letter in late March 2015 stating that she needed to lodge her tax returns prior to 30 June 2015. She said:
I cannot remember with the accumulative series of unusual circumstances that were occurring in my family life at that time as to whether I opened, read and understood that mail before we left or after our return from Ireland. We went early April and returned early May 2015.
Mrs Galvin wrote, and reiterated in her evidence to the Tribunal, that between July and September 2014 her mother became very ill with Alzheimer’s disease and cancer. Mrs Galvin was her primary carer during this period, nursing her and taking her to and from medical appointments. Mrs Galvin’s mother lived with Mr and Mrs Galvin from July until she sadly passed away in October 2014.
In February 2015, Mrs Galvin’s grandmother, who lives on the same farm as Mr and Mrs Galvin, was suddenly taken ill and was hospitalised with a bacterial infection. She contracted necrotizing fasciitis and was in intensive care for two weeks and then stayed a further four weeks in hospital. When she was discharged, a cousin moved in with Mrs Galvin’s grandmother and together they helped to look after her. Mrs Galvin said for that for the first month (i.e. from around the end of March 2015), she showered and helped dress her grandmother.
Around the beginning of April 2015, Mr Galvin’s father, who resides in Dublin, had a fall and fractured his back. Mrs Galvin said the family was alarmed at this sudden accident and, at short notice, she and Mr Galvin, together with their four children, flew to Ireland to see him. They returned to Australia in May.
Mrs Galvin said in her submission dated 11 May 2015 (ST1):
“I completed my tax and got it to the accountant by the beginning of June 2015. I asked Bill Fulcher (my accountant) to please get it lodged before the June 30th deadline. I didn’t know at the time he was sick and undergoing intensive chemotherapy. As stated in his letter there is a protocol in the paperwork for our family trust fund and the procedure is quiet [sic] involved. The tax wasn’t lodged to the tax department until July 23rd 2015.”
Mrs Galvin’s evidence
Mrs Galvin said she did all the paperwork for their small business. She said her mother was chronically ill from about February 2014 and she was trying to manage that additional obligation with caring for four small children, the oldest at that time aged 7 and the youngest 1 year old.
She said that she was getting up five or six times a night to care for her mother. Then, after the grief of losing her mother, her grandmother’s sudden illness left her, in her words “astronomically stretched”.
She agreed that around March 2015 she had received a letter from Centrelink and remembered that she “had to get our tax together”. She told the Tribunal that she has been handling the books of the business for about fifteen years and prided herself in getting the bookwork in order for the accountant. She said that she and her husband had a long business relationship with their accountant, Mr Fulcher.
She told the Tribunal that she “got the books to the accountant on 23 June 2015”. She said she did not know at the time that her accountant was undergoing chemotherapy.
Mrs Galvin agreed with counsel for the Applicant that some of the matters which she was dealing with were part and parcel of everyday life, such as caring for elderly relatives and, with her husband, bringing up their children. She submitted that one or two special circumstances would not meet the criteria of special circumstances required in the legislation, but that four specific circumstances together do, accumulatively, amount to special circumstances.
The Tribunal asked Mrs Galvin how long her accountant usually took to prepare her tax returns, given that she had been using the same firm for many years. Her response was that sometimes it took about one week, but usually he would let her know ‘within a month’ that the paperwork had been prepared and would send her the taxpayer’s declarations for Mrs and Mr Galvin to sign so the returns could be lodged with the ATO. When asked when she received the prepared returns from the accountant, Mrs Galvin could not recall and said she “would have sent them straight back; life was a whirlwind”.
The Tribunal asked about the discrepancies about the time Mrs Galvin said she delivered the returns to the accounting firm. Mrs Galvin contacted the Department on 8 February 2016 (T16, p. 81). The Department officer entered a record of the contact which reads, in part:
“Cus adv that her income details were with the account [sic] and that she had completed everything she was supposed to do by May or June 2015. Cus was not aware that it had been lodged late. Cus will speak to accountant to [find out] why it was lodged late, and if there were any reasons, she will get this in writing.”
In the ARO’s record of a discussion with the Respondent of 17 March 2015, Mrs Galvin echoes this belief that she provided all the required information to her accountant in ‘May/June 2015.’
In her 11 May 2015 letter (ST1) she states they were delivered “by the beginning of June 2015”.
AAT1 recorded, in paragraph 28 of that decision (T3), after recounting the various unexpected family events that had affected Mr and Mrs Galvin in late 2014 and early 2015:
“These events resulted in Mrs Galvin and her partner delaying their organising of their taxation affairs and of delivery of taxation details to their accountant, but they managed to provide the relevant documentation in approximately early June 2015.”
(Emphasis added.)
However, in this hearing, Mrs Galvin accepted that she delivered the books required to prepare the returns to the accountancy firm on 23 June 2015. She was asked what happened that day. She said she was taking her grandmother to a medical appointment so she first dropped her children at school, picked up her grandmother and drove to where the accountancy firm had its upstairs office. She left her grandmother in the car and quickly ran upstairs and left the papers for the accountant. She recalled that the firm’s EFTPOS system was not working. She recalled that she told Mr Fulcher’s receptionist that “I need this before the end of June,” and that the response was that the receptionist would see what she could do. She said she did not ask Mr Fulcher to call her back if the timeframe was not possible.
When asked, as the 30 June 2015 deadline approached, whether she took steps to follow the matter up with the accountant, she said that she did not, because that was not a priority at the time. Mrs Galvin said that she telephoned Centrelink at some time before 30 June but rang off after waiting on hold for some time.
Mrs Galvin said that the crux of her case was special circumstances led to her inability to lodge the returns with the accountant in time in order to have them done in the normal timeframe.
Consideration - were there special circumstances that prevented lodgement?
In order to decide whether AAT1’s decision was correct, therefore, the Tribunal must look at the words of section 32C of the Administration Act and in particular whether special circumstances prevented the Respondent lodging her tax return.
The term “special circumstances” is not defined in the Act or the Administration Act.
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J considered the meaning of the expression “special circumstances”. Her Honour said:
“The phrase ‘special circumstances’, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle’s case [Beadle v Director-General of Social Security] at ALR 229 ALD 674, and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.
In Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 44 AAR 436, Besanko J warned against requiring there to be exceptional circumstances before there may be said to be special circumstances:
... I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.
The Tribunal has carefully considered the submissions made by Mrs Galvin. The Tribunal considers that she presented as an honest and forthright person. She readily accepted that she had received a letter in March 2015 from the Department alerting her to the need to lodge her and her husband’s 2013/2014 tax returns by 30 June 2015 to avail herself of FTB payments. She conceded that she may have read the letter but in the ‘fog’ of organising for her family to travel at short notice to Ireland to visit Mr Galvin’s sick father, it had “not been a priority.”
The Tribunal also notes that the decline and sad demise of Mrs Galvin’s mother must have been a distressing situation in the second half of 2014, as would have been the unexpected and sudden infection that her grandmother’s contracted in February 2015.
However, the Tribunal must also balance these with the arguments of the Applicant that these events are part of the normal vicissitudes of life. Section 32C(3)(b) sets, in effect, a two-part test. Were there special circumstances, that is circumstances that were “unusual” or “uncommon” relating to the person, and did those special circumstances prevent the person lodging his or her tax return before 30 June in the succeeding financial year?
The Tribunal is minded to accept that the particular run of circumstances that Mr and Mrs Galvin faced in the 2014/2015 financial year were, cumulatively, uncommon. Juggling the needs of small children in a family is not uncommon or unusual, nor is the care of an elderly parent or grandparent – that is what family members do. And, sadly, the death of a close family member is something that we all have faced, or will face. But when one puts these matters together, and adds to them a sudden injury to another close family member on the other side of the world, it is, to borrow the words used by Senior Member Britten-Jones in Secretary, Department of Social Services and Willersdorf [2016] AATA 535 (Willersdorf), at [62], something of “a perfect storm”.
However the second part of the legislative test that the Tribunal must also consider is whether that unusual or uncommon combination of events prevented Mrs and Mr Galvin lodging their tax returns. Mrs Galvin said in her evidence that her usual practice was to lodge her returns for a financial year “by August” following the end of the financial year in question. She said she had been doing the books for the farm and her husband’s business for some thirteen years. At that time in 2014 she would have been preoccupied with the serious terminal illness of her mother, but the other cited circumstances that were to come to pass had not yet eventuated. Her grandmother had not taken ill and her father-in-law had not had his fall.
Mrs Galvin’s evidence is that the family went away to Dublin on 11 April 2015. They were away for around four weeks and returned in early May. On her return she resumed caring for her grandmother, and domiciliary nurses were also coming in to dress her grandmother’s wounds. She said her grandmother only wanted her to shower her and this level of care continued to around Christmas 2015.
It would seem to me that the special circumstances that I consider did apply to Mr and Mrs Galvin at this time did not prevent the lodgement of the tax returns. Mrs Galvin was able to lodge her 2012-2013 returns even though she was contending with the obvious pressures of her late mother’s illness. She returned from Ireland in early May 2015 but did not take her paperwork to Mr Fulcher’s accounting practice until Tuesday 23 June 2015, five working days before the deadline of 30 June 2015 of which she has admitted she was aware.
I have excluded Mr Fulcher’s illness as a special circumstance on the basis that Mrs Galvin’s evidence is that she did not know he was undergoing a course of treatment when she lodged her paperwork. This does not seem to me to be a relevant matter because Mrs Galvin’s evidence to the Tribunal that preparation “usually” was within a month. Mr Fulcher’s letter of 30 September 2016 relevantly states (Annexure 1 to Exhibit R1):
1. Mrs Galvin provided the books and supporting documents on 23 June 2015…
2. Compounding the fact was that W Fulcher was undergoing treatment however was able to finalise within a 4 week time span.
3. Due to the nature of their businesses it was not possible to finalise the returns within a 7 day time frame even allowing for the fact that Mr Fulcher lost some time to undergoing treatment. The family runs two businesses being –
-partnership for car repairs and mechanicals
-trust for the horse riding school and agistment
There is a reasonable amount of effort and detail preparing the financials and tax returns are not just an individual tax return. Ford Partners prepares full financial statements and tax returns plus resolutions and other declarations associated with the activities of the businesses. Due to the economic situation we noted that the businesses were not generating expected profits and consequently Mrs Galvin would not be in a tax paying position.
4. Apart from the 2014 tax year Mrs Galvin has endeavoured to keep in line with the lodgement program.
The Tribunal notes that Mr Fulcher corroborates Mrs Galvin’s evidence about the time it usually takes to prepare her and her husband’s tax returns, keeping in mind her evidence that Mr Fulcher has been doing this work for her hand her husband for over a decade. However, he also makes clear that his course of treatment did not unduly delay him in attending to this work; in fact it would appear, given Mrs Galvin said that she and her husband would have signed the declarations as soon as they received them in the post, this work was completed in around three weeks, sent out for signature, signed by the taxpayers and then sent back for lodgement with the ATO. I therefore conclude that Mr Fulcher’s medical situation is not relevant.
Sympathetic as I am to the travails that Mrs Galvin faced, she waited until the last few days of the 2014-2015 financial year to lodge her tax paperwork with her accountant. She had from around the end of the first week in May 2015 to do this and the only additional preoccupation at this time was her care for her grandmother.
Mrs Galvin accepted that she had received a reminder from the Department in March 2015 to lodge her returns on time. I do notice that what she apparently said to the Department in February and what she told the ARO and AAT1 about when she gave Ford Partners Pty Ltd the necessary paperwork, but I do not believe the Respondent was trying to be deliberately misleading, because in her opening submissions at this hearing she immediately accepted the date of ‘23 June 2015’ which is when Mr Fulcher’s firm recorded receipt of the material.
I have looked at Willersdorf and the conclusions of Senior Member Britton-Jones, because there are some similar factual circumstances in terms of family deaths and other family events which accumulated, but Ms Willersdorf’s case is distinguished from Mrs Galvin’s because in the former Ms Willersdorf provided her tax material in the preceding December and had regularly followed up progress with completing the preparation of the tax returns with her accountant by email and, had received assurances that her return was being prepared. That is not the case here. Accepting Mrs Galvin’s evidence about what she told Mr Fulcher’s receptionist, she did not follow the matter up to impress him of the urgency, and admitted that she had “other priorities”.
That is understandable, but the finding of the Tribunal is that AAT1 erred in setting aside the ARO’s decision. AAT1 was under a misapprehension about when the tax return paperwork was actually lodged with the accounting firm, which has been clarified by later evidence.
The Tribunal’s conclusion is that the requirements in section 32C of the Administration Act are not met. Special circumstances did not apply which prevented the lodgement of the 2013-2014 tax returns of Mr and Mrs Galvin by 30 June 2015.
In making this conclusion, the Tribunal emphasises that the relevant test in section 32C of the Administration Act, while a test with particular ingredients which were not satisfied in this case, may be satisfied where there is a combination of circumstances which all combine to, on a reasonable assessment, prevent, that is hinder or stop, a person from lodging a tax return by the relevant deadline.
DECISION
The Tribunal sets aside the decision under review and, in substitution, affirms the original decision that the Respondent is not entitled to Family Tax Benefit supplements and top ups for the 2013/2014 financial year.
I certify that the preceding 51 (fifty one) paragraphs are a true copy of the reasons for the decision herein of Mr D. J. Morris, Member.
............[sgd].......................................................
Administrative Assistant - Legal
Dated: 1 August 2017
Date(s) of hearing: 26 May 2017 Applicant: In person Representative for the Respondent: Ms A Wong Solicitors for the Respondent: Mills Oakley
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