Gerhardt v Department of Employment, Education and Training
[1997] FCA 815
•20 AUGUST 1997
IN THE FEDERAL COURT OF AUSTRALIA )
) QUEENSLAND DISTRICT REGISTRY ) ) GENERAL DIVISION )
AN APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL
QG 80 of 1996
BETWEEN: SCOTT ANDREW GERHARDT
ApplicantAND: DEPARTMENT OF EMPLOYMENT,
EDUCATION AND TRAINING
Respondent
QG 81 of 1996
BETWEEN: KERRI LEANNE GERHARDT
ApplicantAND: DEPARTMENT OF EMPLOYMENT,
EDUCATION AND TRAINING
Respondent
JUDGE: RYAN J PLACE: MELBOURNE (HEARD IN BRISBANE) DATE: 20 AUGUST 1997
MINUTES OF ORDER
THE COURT ORDERS:
That the applications be dismissed with costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) ) QUEENSLAND DISTRICT REGISTRY ) ) GENERAL DIVISION )
AN APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL
QG 80 of 1996
BETWEEN: SCOTT ANDREW GERHARDT
ApplicantAND: DEPARTMENT OF EMPLOYMENT,
EDUCATION AND TRAINING
Respondent
QG 81 of 1996
BETWEEN: KERRIE LEANNE GERHARDT
ApplicantAND: DEPARTMENT OF EMPLOYMENT,
EDUCATION AND TRAINING
Respondent
JUDGE: RYAN J PLACE: MELBOURNE (HEARD IN BRISBANE) DATE: 20 AUGUST 1997
REASONS FOR JUDGMENT
The applicants in these two related matters are brother and sister. At all material times they were full-time tertiary and secondary level students respectively. In 1993 and 1994 the applicants applied for and received Austudy grants. They had been assisted in completing their applications by their mother (“Mrs Gerhardt”). In accordance with the Austudy Regulations, the levels of Austudy entitlement in each of 1993 and 1994 were based on the level of parental income in the preceding financial year. The applicants had earlier received Austudy calculated by reference to their parents’ income for the financial years 1991/92 and 1992/93. Parental income, for the purposes of the Austudy Regulations, was defined by Reg. 86 in the following terms:
86. (1) The parental income is the amount calculated using the following formula:
Gross parental income - Deductions for children
where:
“Gross parental income” means the sum of the income of each of the student’s parents in the most recent financial year before the year of study, unless this is modified by the concession in regulation 90;
“Deductions for children” means the deductions for dependent children described in regulation 87.
(2) The income for each parent is:
(a)his or her taxable income within the meaning of subsection 6(1) of the Income Tax Assessment Act 1936; and
(b)any other income on which income tax is payable to a foreign country; and
(c)an amount received by, or on behalf of, the parent for the maintenance of the parent or of a dependent of the parent.
(2A) If, under subregulation (2), a parent’s income is determined to be an amount less than zero, the income is disregarded in determining parental income.
The respondent produced an annual Austudy guide (“the guide”) to assist applicants to complete the Austudy application forms in accordance with the Austudy Regulations. Mrs Gerhardt, in addition to having seen previous editions of the guide, had a copy for each of the relevant years 1993 and 1994. Both copies were in similar terms. The relevant parts of the 1993 guide were in a document called “Austudy ‘93 Volume 2: Guide To Student Finance”. Under the heading “Parental Income Test” at p. 34 the following requirement appears:
If you are eligible for the Standard or Away-from-home rate you will be income tested on your parents’ or guardians’ income. (See Glossary for AUSTUDY definition of “parent”.) You will need to provide details of both parents’ 1991-92 financial year income, any income earned and taxed overseas, and any maintenance payments either parent received from or paid to a separated or former spouse.
and at p. 35 under the same heading:
For income earned overseas, your parents need to provide a Statutory Declaration showing the total amount in the currency of the country where it was earned, less any deductions for taxation purposes in that country.
The following appears under the heading “Income Details”:
In the box marked taxable income you must include any income received during the 1991-92 financial year.
Taxable income includes:
-your taxable income as shown on your 1991-92 Taxation Notice of Assessment;
-any pensions, allowances or benefits received from the Department of Social Security or the Department of Veterans’ Affairs if taxable;
-money earned below the tax threshold (i.e. $5,400), less any deductions allowable for taxation purposes;
-income earned overseas or in an external territory. If it was not taxed in Australia, attach a statement showing the total amount in the currency of the country where it was earned less any deductions allowable for taxation purposes. We will convert the amount to Australian currency.
Identical questions numbered 40 and 46 on the Austudy application form for 1993 required an applicant’s father and mother respectively to provide information as to income. Both were in the following terms:
Give your income details between 1 July 1991 and 30 June 1992.
Include:*taxable income (even if below the $5,400 tax threshold);
*any maintenance received or paid out (see guide).
Do not leave any box blank, write ‘nil’ if no income
taxable income [$ ]
maintenance received [$ ]
(NOT Family Payments)
Total [$ ]
Maintenance Paid [$ ]
Identical questions 41 and 47 were in the following terms:
Did you send in a tax return for the 1991-92 financial year?
No [] see guide for evidence of income required
Yes[] attach the original Taxation Notice of Assessment sent by the Australian Taxation Office for 1991-92. If not received, provide other evidence of income (see guide).
Mrs Gerhardt filled in the appropriate boxes marked “taxable income” in response to questions 40 and 46. She stated the income of the applicants’ father for the year 1991/92 to be $605, and her own income for the same period to be a loss of $42,577. She did not, however, include $82,523 of income earned by her husband in Indonesia (“the overseas income”). Mrs Gerhardt ticked “yes” to questions 41 and 47 and attached an income tax notice of assessment for the year 1991/92 (“the notice of assessment”) in which the applicants’ father’s taxable income was shown as $605. At the foot of the notice of assessment was stated the following:
Additional Information
$82523 Exempt Foreign Salary and Wages has been taken into account to calculate the tax payable on your taxable income.
Mrs Gerhardt also attached the following note to the notice of assessment:
Mr R.J. Gerhardt is currently overseas and will not be returning until mid-January ‘93 and will sign forms then.
So far as Austudy assistance to the applicants in 1993 was concerned, calculations were based upon income amounts of $605 and a loss of $42,577 as the income of the father and mother respectively. The calculations did not take into account the amount of $82,523 being the father’s overseas income.
Following receipt of the results of a data matching process with the Australian Taxation Office, the applicants’ entitlement was recalculated taking account of all the father’s income, including the overseas component. Consequently, the applicants were determined to be ineligible for Austudy in that year as the recalculated parental income exceeded the threshold at which Austudy assistance was payable. As a result an overpayment for 1993 was raised in the amounts of $6,178.93 and $2,929.77 for each of the two applicants respectively.
Insofar as 1994 was concerned the second applicant again received Austudy assistance and it would seem that the calculations were again based upon the level of parental income which did not take into account the overseas earnings of the applicant’s father in the amount of $69,149. During 1994, through negotiations with the respondent in respect of the earlier years of entitlements, the Department became aware of the levels of overseas income. Mrs Gerhardt was required to provide a further estimate of income which would be received in the 1993/94 financial year. The information provided showed that the father’s overseas income was expected to be in the amount of $131,392. On the basis of that information, the respondent ruled that calculations for Austudy entitlements in the period from 1 October 1994 had to be based upon the parental income levels in the 1993/94 financial year rather than the previous financial year. In the result, it was determined that the income level was such as to preclude the payment of benefits after 1 October 1994 and a further overpayment of $768.70 was raised.
The applicants requested the respondent to waive the overpayments of $6,178.93 and $2,929.77 for the year 1993, and $768.70 for 1994, on the grounds that the debt had arisen solely because of an administrative error on the part of the respondent. The respondent has declined to do so, and as a result these proceedings have been instituted.
The relevant statutory provisions as to waiver by the respondent are contained in s 289 of the Student and Youth Assistance Act 1973 (Cth) and are in the following terms:
Waiver of whole of a debt
Waiver of debt
289. (1) The Secretary may, on behalf of the Commonwealth, decide to waive the Commonwealth’s rights to recover the whole of a debt from a person but only in accordance with this section.
Administrative error
(2) The Secretary must waive if:
(a)the debt arose solely because of an administrative error made by the Commonwealth; and
(b)the person received in good faith the payment or payments that gave rise to the debt.
Mr Samios of Counsel for the applicants submitted that both applicants had received the payments in good faith and, furthermore, that Mrs Gerhardt had made no error in her interpretation of the Austudy application form. Rather, he said, the error resulting in the overpayment was solely that of the respondent. The income figure to be included in the box marked “taxable income”, it was submitted, meant income to be taxed. Mrs Gerhardt knew that her husband’s overseas income had already been taxed in Indonesia and that consequently it was not necessary to add that component to the taxable income earned in Australia. Counsel submits that this interpretation is consistent with the requirements in the Austudy guide. Furthermore, Mrs Gerhardt, in attaching the Notice of Assessment, had disclosed that her husband had earned $82,523 of taxed overseas income and had therefore fulfilled the requirement of attaching proof of overseas income.
Miss Ford of Counsel for the respondent has conceded that the applicants received the Austudy assistance in good faith, but has submitted that no administrative error was committed by the respondent or, in the alternative, if such an administrative error had been made, it was not the sole error. It was further submitted that in omitting to include her husband’s overseas income in the box labelled “taxable income” on the Austudy application form, Mrs Gerhardt had made an error.
Miss Ford pointed first to Reg. 87(2)(b) which states that the income of a student’s parent comprises, amongst other things, “any other income on which income tax is payable to a foreign country”. This, so the argument went, is reflected in the Austudy guide where it states that any taxable income figure disclosed for the purposes of completing the application form is to include income earned overseas, whether already taxed or not. The guide also requires a separate statutory declaration which would put the assessor on notice of the existence of overseas income and provide the requisite information of the amount (if any) of the tax which had been paid on it. Where the overseas earned income had been converted into Australian dollars, as in this case, then the figure could be included in the box marked “taxable income”. Where the figure was in a currency other than Australian dollars, then, as required by the attached Austudy guide, a statutory declaration would provide the necessary information to enable the respondent to make the conversion to Australian dollars.
Miss Ford further pointed out that even if, as in this case, the overseas income had already been converted to Australian dollars and therefore capable of being included in the total in the box marked “taxable income”, that did not alter the requirement indicated in the Austudy guide to attach a statutory declaration or some separate document alerting the assessing officer to the existence of the overseas income component of the parent’s taxable income. As long as some separate document, such as a statutory declaration or other notification of the overseas income had been attached to the Austudy form, the requirements embodied in the guide would have been complied with. What Mrs Gerhardt could not do, in Counsel’s own words, was to let the information “slide through in a document that is there for other reasons”. Thus it was submitted that Mrs Gerhardt had not only completed the application form incorrectly by omitting to include her husband’s overseas taxed income but had also failed to attach a statutory declaration, or other separate document, as required in the guide, to put the respondent on notice of the existence of such overseas earned income and that consequently she had been in error.
It was submitted on behalf of the respondent that the fact that Mrs Gerhardt had included a notice of assessment which referred to the overseas income did not correct the error imputed to her in the argument just rehearsed, and that, in any case, the notice of assessment was required as proof of the $605 earned by her husband within Australia. Counsel pointed to question 41 on the Austudy application form which required the inclusion of such a notice of assessment as proof of income. The respondent further submitted that this omission by Mrs Gerhardt resulted in the payment of incorrect Austudy assistance to the two applicants.
Counsel for the applicants submitted that even if Mrs Gerhardt had made an error in completing the application forms, the respondent had also made an error in not acting upon the information on overseas earned income contained in the notice of assessment. Counsel further submitted that Mrs Gerhardt’s error had been rendered inoperative by this administrative error. The chain of causation had been broken and the subsequent overpayment was solely the result of the later administrative error. In this regard, Mr Samios drew attention to the Social Security Appeals Tribunal’s discussion of the evidence where at para. 5.1 the following is noted:
The level of taxable income referred to in the Notice was the same as that nominated by the applicant’s parents in the application forms and reliance was placed upon that figure without regard being had to the additional information contained in the Notice of Assessment.
And again at para. 7.6:
There has been administrative error by the Department in this case. This error has been in the form of a failure to take into account the additional information contained in the Notice of Assessment. We are reasonably satisfied that a prudent assessor, exercising reasonable care, would have been placed on enquiry as to the prospect of overseas income because of the additional information contained in the Notice of Assessment provided by the applicant in the application form. Had such an enquiry been made and followed through by the prudent assessor, full details of the income of the applicant’s father would have been obtained and calculations would have been based, from the outset, on correct income levels.
At para. 7.7 it is further noted:
Whilst the Tribunal is reasonably satisfied of the above administrative error, we are also satisfied to that degree that the debt did not arise “solely” because of it.
Mr Samios pointed, as well, to p. 18 of the reasons for decision of the learned Deputy President of the Administrative Appeals Tribunal, where, at para. 45, this finding is made:
The Commonwealth, I find, did make an error when the figure for overseas income on the Notice of Assessment was overlooked in calculating the Austudy entitlements of Mr and Miss Gerhardt. This was an error which followed from Mrs Gerhardt’s error in completing the form and providing the information in the form requested.
Mr Samios submitted that those paragraphs amounted to findings of fact that the assessing officer within the respondent Department was aware from the notice of assessment of the existence of exempt overseas income and, for whatever reason, had disregarded it or taken no action in respect of it. It was then further submitted that the learned Deputy President erred to the extent of proceeding on the basis that Mrs Gerhardt made an error which caused the Department to make an error. Counsel submitted that Mrs Gerhardt’s error was no longer operative once the Department had been put on notice of the true position, and that the overpayment of Austudy was consequently the result solely of the administrative error.
It seems to be accepted by both parties in this case that Mr Gerhardt’s net overseas earned income had been expressed in the notice of assessment as a figure converted into Australian dollars. It was submitted that Mrs Gerhardt had interpreted “taxable income” on the Austudy application form to mean income to be taxed. As her husband’s income had already been taxed overseas, there was no requirement to include that figure on the Austudy application form. Regulation 86(2)(b) defined taxable income as including income on which income tax is payable to a foreign country. The guide seeks to assist applicants to comply with this requirement by defining “taxable income” as including income earned overseas. I do not agree with the submission of Counsel for the applicants that Mrs Gerhardt’s interpretation was consistent with this requirement. The guide clearly states that taxable income includes income earned overseas. Regulation 86(2)(b) requires taxable income to include income on which income tax is payable to a foreign country. I do not regard this as meaning that income on which income tax has already been paid in a foreign country does not qualify as taxable income for the purposes of this Regulation. To this extent Mrs Gerhardt has been in error both in her interpretation of the requirements and in subsequently applying them in completing the form.
To what extent, however, did the attachment of the notice of assessment satisfy the requirement in the guide to include documentation, such as a statutory declaration, detailing overseas earned income whether expressed in Australian dollars or not? Clearly the notice of assessment was directed to supplying proof of Australian earned income. Indeed, questions 41 and 47 on the Austudy application form required the notice of assessment to be included as proof of that kind. However, Counsel for the applicants submits that despite the inclusion of overseas income in the notice of assessment rather than on some separate document as the guide envisages, the assessing officer was nevertheless aware of the existence of overseas income. In this respect, Counsel for the applicants has pointed to the finding of fact by the learned Deputy President of the Administrative Appeals Tribunal that the Commonwealth’s error occurred “when the figure for overseas income on the notice of assessment was overlooked”.
Does this error by the respondent, as the applicants claim, operate so as to deprive the error by Mrs Gerhardt of continuing effect? If the assessing officer had been made aware of the overseas income and had chosen to ignore it, then any omission by Mrs Gerhardt in not attaching a statutory declaration would surely have been overtaken by the error of the assessing officer. The assessing officer’s administrative error would then have been the sole cause of the overpayment to the two applicants. However, the findings of fact in this case are that the assessing officer, rather than being aware of the figures in the notice of assessment and choosing to disregard them, had simply overlooked those figures.
It should be noted that the notice of assessment is not a statutory declaration as required in the guide. Still less was it a separate documentary notice of the existence of earned overseas income. Here the reference to overseas income was simply overlooked in a document because it appeared in a document supplied for another purpose and not specifically designed to draw the assessing officer’s attention to its existence. To this extent the error of Mrs Gerhardt, in not attaching the required documentation, was still operative. Thus, the administrative error of the respondent cannot be said to have been the sole error, and it follows that, in accordance with s 289(2) of the Student and Youth Assistance Act 1973, there was no requirement on the respondent to waive the debt incurred by the two applicants.
In reaching this conclusion I have not been unmindful of the finding by the Social Security Appeals Tribunal at para. 7.6 which is quoted above. However, that was concerned with what a reasonably prudent assessor should have done. The Tribunal did not go so far as to find that the particular assessor had actual knowledge of Mrs Gerhardt’s mistake, so as to deprive that mistake of any operative effect in bringing about the overpayment.
Counsel for both parties have made further submissions as to whether special circumstances exist in this case to persuade the Court to exercise its discretion and waive the debt. As I am of the view in this case that the error of Mrs Gerhardt was operative in the overpayment by the respondent, I am not persuaded that the repayment of the debt in this case would be unreasonable, inappropriate or unjust.
For these reasons the applications must be dismissed with costs.
I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment of the Honourable Justice Ryan.
Associate:
Dated: 20 August 1997
Counsel for the Applicants: Mr W Samios Solicitors for the Applicants: Mullins & Mullins
as Town Agents for
Bill Cooper & AssociatesCounsel for the Respondent: Miss E Ford Solicitors for the Respondent: Australian Government Solicitor Date of Hearing: 24 April 1997 Date of Judgment: 20 August 1997
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