Haines and Secretary, Department of Families, Community Services and Indigenous Affairs

[2007] AATA 1221

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1221

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2005/110

GENERAL ADMINISTRATIVE DIVISION        )

Re         KELVIN HAINES

Applicant

And                      And       SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES and INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr RG Kenny, Member

Date12 April 2007 

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

………[Sgd]……….

RG Kenny

Member

CATCHWORDS

SOCIAL SECURITY – newstart allowance – engagement as an employee rather than as an independent contractor – failure to provide accurate information about income and working hours – overpayment of newstart allowance – debt due to the Commonwealth –  no basis for waiver of debt – decision affirmed

Social Security Act 1991 (Cth) ss 8, 643, 1068, 1072, 1075, 1223, 1224, 1237A, 1237AAD

Social Security (Administration) Act 1999 (Cth) s 68

Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Secretary, Department of Social Security v Ekis (1998) 85 FCR 382
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Beadle and Director-General of Social Security (1984) 1 AAR 362
Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

12 April 2007  Mr RG Kenny, Member

Application

1.      In the period from 28 January 2000 until 26 January 2004, Kelvin Haines (the applicant) received income support payments under the Social Security Act1991 (the Act) in the form of newstart allowance.  During that time, he was in remunerative work and the amount of newstart allowance that he was paid depended upon his income.  He was required to advise Centrelink of his earnings and hours of work on a fortnightly basis.  On 15 September 2004, a Centrelink officer determined that Mr Haines had understated his income and that, as a result, he had been overpaid.  Debts were raised against him for three separate periods.  An Authorised Review Officer with Centrelink varied the decision so that the relevant debts and time-frames were: $2,719.53 from 28 January 2000 until 16 November 2000; $6,661.53 from 2 March 2002 until 15 February 2003; and $6,421.38 from 3 March 2003 until 26 January 2004.  That decision was affirmed by the Social Security Appeals Tribunal (the SSAT) on 8 February 2005.  Mr Haines seeks further review by the Administrative Appeals Tribunal.

Issues for Determination

2.      Mr Haines is qualified to work as a traffic controller.  During the first overpayment period noted above, he was engaged in that capacity by Guardrite Security.  During the other overpayment periods, he was engaged as a traffic controller by Traffic Services Australia.  When Mr Haines notified Centrelink of his fortnightly earnings, he deducted an amount to meet work-related expenses from his gross earnings.  He contended that he was entitled to do this because, at all times, he was an independent contractor rather than an employee.  Centrelink accepted that this was the case when he was engaged by Guardrite Security.  Nevertheless, in that period, an overpayment still arose.  This was because he provided incorrect information about his income and hours of work.  Mr Haines conceded that he had done this and advised that he did not challenge the decision as it related to the first overpayment period. 

3.      Ms Forsyth submitted that Mr Haines was not self-employed during the second and third overpayment periods when he was engaged by Traffic Services Australia.  This meant that he was not entitled to deduct work-related expenses from his gross earnings for the purposes of calculating the level of his newstart allowance. Ms Forsyth also submitted that, even if he were self-employed during those times, a debt arose because of incorrect notification of income amounts and working dates during those periods.  Mr Haines submitted that there were several factors about his relationship with Traffic Services Australia which pointed to his being an independent contractor, although he conceded that he had not given correct information to Centrelink about his employment.

4.      The issue for determination is whether Mr Haines was self-employed during the periods of engagement with Traffic Services Australia and, if not, whether there is a repayable debt due to the Commonwealth.

Mr Haines’ Evidence

5.      Mr Haines holds a licence to carry out the functions of a traffic controller.  During his time with Traffic Services Australia, he attended various projects which required him, in conjunction with at least one other person, to control traffic flow at sites where roadworks were being carried out.  They utilized radios to coordinate traffic movements and were responsible for the installation and removal of relevant signage concerning matters such as vehicle speed.  The coordination of the tasks associated with the control of traffic was undertaken by whoever had the longest period of service.  On many occasions, this was Mr Haines.  The various contractors carrying out the roadwork were described by Mr Haines as the clients of Traffic Services Australia. 

6.      Each evening, Mr Haines was advised by Traffic Services Australia of the following day’s work commitment, to which site he travelled in his own vehicle.  He was required to wear a uniform which was part of a package that he was required to purchase from Traffic Services Australia.  This included the uniform, a hard hat and the sign which was used to direct traffic flow.  For these, he paid $250 which was reimbursed to him when he stopped working with Traffic Services Australia.  He was also required to wear protective boots.  The only item which was provided without charge by Traffic Services Australia was the radio.  However, Mr Haines did not need this service because he had purchased his own radio device.  Mr Haines was also required to have a mobile telephone so that he could be contacted by Traffic Services Australia at any time.  Mr Haines was responsible for the quality of the work that he undertook but did not enter into any insurance arrangements in the event that problems might arise in relation to his work.  Mr Haines was paid fortnightly on the basis of time sheets completed by the client to indicate his hours of work.  A supervisor from Traffic Services Australia would sometimes attend the site to monitor the work.  From time to time, he was required to attend meetings with other traffic controllers at the headquarters of Traffic Services Australia.  Typically, this would occur on a Saturday morning.

7.      To obtain the traffic controller position with Traffic Services Australia, Mr Haines responded to a newspaper advertisement.  He went through an interview process and entered into a verbal contract.  He requested that he be engaged as an independent contractor and that he use his ABN for taxation purposes.  This is what had occurred when he was working with Guardrite Security.  However, he was advised, from the outset, that he was to be engaged as an employee and that Traffic Services Australia would assume responsibility for making superannuation payments and withholding amounts for taxation purposes.  In his evidence, Mr Haines said that Traffic Services Australia had not kept this part of the agreement and that, as a result, he had suffered financial loss.

8.      Mr Haines conceded that he had received letters from Centrelink from time to time which required him to provide information about his income and working days on a fortnightly basis.  He also conceded that he had completed these with incorrect information.  His practice was to advise Centrelink of the amount of his earnings after he deducted the expenses he incurred through his work and which were not reimbursed by Traffic Services Australia.  These included costs associated with running his motor vehicle, paying road or bridge tolls, utilizing his mobile telephone and keeping his uniform clean and in good condition.  He would then nominate, on his fortnightly forms, a reduced number of hours which reflected that income level rather than the full complement of hours he had worked.  He believed that he was entitled to do this because he was an independent contractor and, as such, was entitled to deduct his expenses from his gross earnings.  Mr Haines said that he had discussed the matter with a Centrelink officer who had advised him that an independent contractor was entitled to complete a profit and loss form and would have newstart allowance paid on the basis of net rather than gross income.  He conceded that he had not followed this information up by arranging to lodge such profit and loss documents and had, instead, been required to lodge fortnightly documentation advising of income and hours of work.

9.      Mr Haines described himself as being in reasonably good health and as no longer working as a traffic controller.  He has made arrangements to commence, in the near future, independent contractor operations as a gardener.  

Consideration

10.     Mr Haines’ newstart allowance is calculated with reference to his income and the relevant rate calculator in the Act: see section 643 and 1068 of the Act.  The term "income" is defined, in broad terms, in section 8 of the Act.  A person’s ordinary income includes all gross ordinary income from all sources: see section 1072 of the Act.  If Mr Haines was engaged by Traffic Services Australia as an employee, his income will include all of the monies paid to him by Traffic Services Australia.  However, if he was an independent contractor in that he was carrying on a business, the ordinary income from the business will be reduced by his legitimate business expenses: see section 1075 of the Act. 

11.     A range of factors may be taken into account in determining whether or not a person is carrying on a business or, alternatively, is engaged under a contract of employment.  These include the degree of control exercised over the person as well as matters such as the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work to the person: see Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24 and 49 and Secretary, Department of Social Security v Ekis (1998) 85 FCR 382.

12.     On the material before me, I am satisfied that Mr Haines was engaged under a contract of employment with Traffic Services Australia.  In evidence was a statement from the payroll officer with Traffic Services Australia which declared that Mr Haines had been engaged as an employee and not as a contractor.  While that statement is not definitive of the issue, it was also noted that Traffic Services Australia supplied him with pay slips and group certificates and was required to provide time sheets from the client in order to be paid.  Further, the evidence is that his employment was controlled by Traffic Services Australia in that he was engaged to undertake particular tasks and was subject to supervision in those tasks from time to time.  Mr Haines’ ABN was not required as part of his employment arrangements and the contract of employment was one which required taxation deductions to be made by Traffic Services Australia.  That was also the case with superannuation payments even though it may have been remiss in meeting that obligation. 

13.     Mr Haines completed a Centrelink document on 14 October 2004 in which he was asked a series of questions to assist in the assessment of his work status. There, he stated that he was an employee of Traffic Services Australia.  In his evidence to the SSAT, Mr Haines said that he believed that he was an employee until immediately before that Tribunal heard his application. 

14.     I am satisfied that Mr Haines was not conducting a business whilst engaged by Traffic Services Australia and that, therefore, the expenses he incurred in carrying out those activities cannot constitute permissible deductions as provided for in section 1075 of the Act.  This means that all of the income he received from Traffic Services Australia needed to be taken into account when calculating the appropriate level of newstart allowance which was payable to him. 

15.     As noted above, Mr Haines did not correctly advise Centrelink of the level of his income or of the hours of his employment in his fortnightly declarations.  In the period of his employment from 2 March 2002 until 15 February 2003, his gross earnings from Traffic Services Australia were $14,373.13.  During that time, he declared income in the amount of $3,322.  For the period of his employment from 3 March 2003 until 26 January 2004, his gross earnings from Traffic Services Australia were $19,314.78 and his declared income during that period was $6,681.  Because of those understated income levels, the amount of newstart allowance that was paid to him exceeded his entitlement by $6,661.53 and $6,421.38 in those periods, respectively. Those amounts constitute payments to which Mr Haines was not entitled and, accordingly, they are debts due by him to the Commonwealth in accordance with subsection 1223(1) of the Act.

16. In the period from 28 January 2000 until 16 November 2000, Mr Haines also gave incorrect information about his income and hours of work. This was contrary to the obligations imposed on him by notices which Centrelink sent to him in accordance with section 68 of the Social Security (Administration) Act 1999.  I am satisfied that, as a result, he was overpaid the amount of $2,719.53 which is a debt due to the Commonwealth in accordance with subsection 1224(1) of the Act.  As noted above, this debt was not disputed by Mr Haines.

17.     I have given consideration to whether the debts should be waived as provided for in subsection 1237A(1) and section 1237AAD of the Act.  

Waiver of Debt

18.      The matters relating to waiver of a debt due to sole administrative error by the Commonwealth and to the applicant’s special circumstances arise under subsection 1237A(1) and section 1237AAD, respectively, of the Act.  In so far as relevant in this matter, they read:

“1237A.(1)       Administrative error

1237A.(1)  Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

1237A.(1A)  Subsection (1) only applies if:

(a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or

(b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;

whichever is the later.

1237AAD.      Waiver in special circumstances

1237AAD.  The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

(a) the debt did not result wholly or partly from the debtor or another person knowingly:

(i) making a false statement or false representation; or

(ii) failing or omitting to comply with a provision of this Act or the 1947 Act; and

(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c) it is more appropriate to waive than to write off the debt or part of the debt.

waiver under s 1237A

19.      The first element to be satisfied under sub-section 1237A(1) of the Act is that the debt must be attributable solely to administrative error made by the Commonwealth.  In this case, each of the three components of the debt arose because of incorrect information provided by Mr Haines.  I am satisfied that it cannot be attributed solely to the Commonwealth and, therefore, that it may not be waived under section 1237A of the Act.

waiver under s 1237AAD

20.      For waiver of a debt under section 1237AAD of the Act, it must be the case, amongst the other requirements of the provision, that there are special circumstances other than financial hardship alone that make it desirable to waive the debt.  The Act provides no guidance as to the meaning of the term “special circumstances” in that provision.  In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 674). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security(1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances "must have a particular quality of unusualness that permits them to be described as special".

21.      In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle’s case, observed (at 545) that special circumstances:

“would require something to distinguish... [the]… case from others, to take it out of the usual or ordinary 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.”

22.      On the basis of Mr Haines’ evidence and materials before me, I am satisfied that there are no factors, either individually or taken together, in this case that enable the requirement to repay the debt to be characterised as unusual or unfair and I am satisfied that there are no special circumstances in Mr Haines’ case that would justify waiver under section 1237AAD of the Act.

Decision

23.      The decision under review is affirmed. 

I certify that the 23 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member

Signed:         Fiona Kamst

Legal Research Officer

Date/s of Hearing  19 March 2007
Date of Decision  12 April 2007
The Applicant was unrepresented
For the Respondent                  Ms Forsyth, Departmental Advocate.