Harcombe; Department of Family and Community Services

Case •

[2000] AATA 633

•

1 August 2000

DECISION AND REASONS FOR DECISION [2000] AATA 633

ADMINISTRATIVE APPEALS TRIBUNAL           )

)         No N1999/1133

GENERAL ADMINISTRATIVE DIVISION    )         
          Re      SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES       
  Applicant
          And     SALLY HARCOMBE           
  Respondent

DECISION

Tribunal        DR JD CAMPBELL   
Date              1 August 2000

PlaceSydney

Decision        The Tribunal determines that the decision under review be set aside and in substitution therefor determines that: (a) The decision to calculate family payments based on an estimate was not in accordance with the Act; (b) Remits the matter to the Applicant to (i) Calculate the quantum of family payments that should have been paid to the Respondent according to law; (ii) Calculate whether an overpayment has been made, with both the calculation and the derived calculation being for the period 24 October 1996 to 23 October 1997; (c) If any overpayment is found to exist as a result of actions undertaken in (b), then this is a debt due and payable by the Respondent to the Commonwealth; (d) That any debt can only commence to accrue after 1 October 1997. (e) Any debt found to be owed and payable by the Respondent for the period 24 October 1996 to 28 November 1996 could be waived if it were found to exist; and (f) Any debt found to exist in relation to overpayment for the period 1 October 1997 to 23 October 1997 is due and payable by the Respondent.

[Sgd] Dr J D Campbell  Member        

CATCHWORDS
Social Security Act – family payment –use of estimates – superannuation draw down – under estimation – overpayment – debt – waiver – sole administrative error – special circumstances

Social Security Act 1991, sections 884, 885, 891, 1069 - H, 1223, 1224, 1237.
Re Stuart and Secretary, Department of Family and Community Services [1998] AATA 12626
Secretary, Department of Family and Community Services and Delia(1999) AATA 799.  Secretary, Department of Education, Employment, Training and Youth Affairs v Prime (1997) 152 ALR 127
Re Secretary, Department of Family and Community Services and Butt [2000] AATA 623

REASONS FOR DECISION

DR J D CAMPBELL   

  1. The Secretary of the Department of Family and Community Services ('the Applicant') seeks a review of the decision dated 9 June 1999 of the Social Security Appeals Tribunal that a debt of $3,784.90 was owed by Mrs Harcombe ('the Respondent') for the period 24 October 1996 to 23 October 1997, but that the debt amount should be waived.  This decision had set aside the decision dated 4 December 1998 of an authorised review officer, who had affirmed an earlier decision dated 30 October 1998 of a Centrelink delegate of the Applicant that the Respondent had received overpayment of family payments of $3,784.90 for the period 24 October 1996 to 23 October 1997 and this constituted a debt due and payable to the Commonwealth.

  2. A hearing was held in Coffs Harbour on 6 March 2000 at which the Applicant was represented by Ms Collis, an advocate from the Administrative Law section of Centrelink.  Mrs Harcombe was self-represented and presented oral evidence to the Tribunal.

  1. The following material was placed in evidence before the Tribunal:

Documents prepared pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 T1-18 pp1-65
Australian Taxation Office letter dated 8 February 2000 re Rental Income Schedules for the Respondent and her husband     Exhibit A1     
Applicants Amended Statement of Facts and Contentions dated 2 March 2000     Exhibit A2     
Australian Taxation Office Notice of Assessment for the Respondent and her husband dated 29 July 1997 and 18 July 1997, respectively           Exhibit A3     
Respondents Statement of Facts and Contentions dated 3 March 2000     Exhibit R1     

ISSUES

  1. The relevant issues in this matter are

(a)Whether the Respondent did receive an overpayment of family payment and if so;

(b)Whether this is a debt owing to the Commonwealth and if so;

(c)Whether all or part of the debt should be recovered.

LEGISLATION

  1. The relevant legislation in this matter is the Social Security Act 1991 ('the Act') and in particular sections 884, 885, 891, 1069, 1223, 1224, 1237, and 1237AAD.

BACKGROUND

  1. The Respondent had been in receipt of family payments since 1992.  The Respondent and her family moved to Coffs Harbour in July 1995, at which time the family became reliant on one income (Mrs Harcombe).  For the financial year 1994/95 the Respondents' combined taxable income for the purposes of the calculations of family payment was $52,537.  For the financial year 1995/96 the Respondents' combined taxable income for the purposes of the calculation of family payments was $35,827 (Exhibit R1).  For the financial year 1996/97 the Respondent's combined taxable income for the purposes of family payment was $44,097 (Exhibit R1).

  2. The Respondent was paid family payments, based on an income estimate including rent, of $28,000 for the financial year 1995/96, as opposed to payments based on an actual combined taxable income of $52,537 for financial year 1994/95.

  3. On 14 October 1996 the Respondent lodged an annual 'Review of your Family Payment and Childcare Assistance' form ('the review form') with the Applicant in which she indicated that her husband's earnings for financial year 1996/97 would be less than the previous year; that combined assessable taxable income for family payment purposes for financial year 1995/96 was $35,827 (T4); and that estimated combined assessable income for financial year 1996/97 for family payment purposes would be $28,600 (T4/T8).  On 18 October 1996 the Applicant advised a rate of family payment of $170.80 per fortnight to the Respondent and indicated that such payment had been worked out using the combined estimated income for financial year 1996/97.  Further the Respondent was advised to notify the Applicant within 14 days if the combined income were to exceed $31,460 (T5).  A similar letter issued on 16 December 1996 increasing the rate of family payment and nominating that such family payment had been calculated using the Respondent's combined estimated income (T6).

  4. The Respondent withdrew $15,038 from her superannuation fund (T2, p7) on 28 November 1996.  On 31 October 1997 the Respondent lodged a completed Review Form in which she disclosed combined assessable taxable income of $41,134 for financial year 1996/97, with net property loss of $2,963.  The combined total income for family payment purposes for financial year 1996/97 was $44,097 (T9).

  5. A debt was submitted by the Applicant on 30 October 1998 for the overpayment of family payment to the Respondent of $3,784.90 during the period 24 October 1996 to 23 October 1997.  This decision was affirmed by the authorised review officer on 5 November 1998, but was set aside in a decision of the Social Security Appeals Tribunal dated 9 June 1999.  This decision found that while a debt existed, the debt should be waived.
    RESPONDENT'S EVIDENCE

  6. The respondent stated that the combined taxable income for family payment purposes in financial year 1994/95 (base year) was $52,537.  The Applicant stated that she was unaware at the time that the family payments for calendar year 1996 had been calculated using an estimate; that this was further reinforced when she made enquiry by telephone to the Applicant in early February 1996 concerning rent assistance.  At all times during this period the Respondent stated that she was unaware that she was being paid family payments based on an estimate and believed that she was receiving payments to which she was duly entitled.

  7. The Respondent told the Tribunal that in late July 1995 her husband ceased work and the family had to then rely upon her gross earning of $550 per week.  Further she stated that her taxable income and her husband's taxable income for financial year 1995/96 was $26,249 and $3,133, respectively.  Further there was a net loss from a rental property during 1995/96 of $6,445, making a combined taxable income for family payment purposes of $35,827.  In completing the Review Form on 11 October 1996, the Respondent stated that she detailed the 1995/96 taxable income for her partner and completed the estimate details for 1996/97 taking into account of her husband's cessation of work, the estimate was $22,800 plus net loss from a rental property of $5,800 which equates to a combined estimated taxable income of $28,600 for financial year 1996/97.  This figure was similar to a combined estimated taxable income for financial year 1995/96 of $28,600.

  8. When the $15,038 was drawn down from the superannuation fund on 28 November 1996, the Respondent stated that she was unaware that such a draw down would have any effect on her family payment, particularly where the draw down has been approved on financial hardship grounds.  The Respondent stated that she did not believe the draw down was a notifiable event and that the taxable effect of the draw down became evident when she received the notice of assessment on 29 July 1997.  Throughout the period in question the Respondent stated that she was unaware that she was being paid on an estimate, although she did acknowledge that she had completed the Review Form on 4 October 1996, which included a warning in statement 15 about the need to recalculate where the estimates have been used and later found to be an underestimate.
    SUBMISSIONS

  9. The Applicant submits that the Respondent had been paid family payment for calendar year 1996 on combined taxable income estimate of $28,600 for financial year 1995/96 and again for calendar year 1997 on a combined taxable income estimate of $28,600. Simply stated, the Applicant contends that the Respondent's rate of family payment was paid on an estimate, one year to the next, and that the problem arose because of the Respondent's misunderstanding as to the effect the superannuation withdrawal would have on her taxable income for financial year 1996/97. This in turn led to the situation where the actual combined taxable income for family payment purposes for financial year 1996/97 was $44,097, an amount considerably in excess of the level at which the Respondent was to notify the Applicant ($31,460). The direct consequence of the failure to notify by the Respondent was an overpayment of family payment during the period 24 October 1996 to 23 October 1997 and in the Applicant's view this overpayment constitutes a debt due and payable by the Respondent under subsection 1223(3) of the Act.

  10. The Applicant further contends that there has been no administrative error, for even if it was considered that there had not been a request made by the Respondent in the necessary format to satisfy subsection 1069-H21 of the Act, it was appropriate for the Secretary to utilise his broad powers contained within sections 878 and 879 to reassess the rate of family payment, as was done in Secretary, Department of Family and Community Services and Delia (1999) AATA 779.

  11. Thirdly, the Applicant contends that the Respondent had been paid family payments based on estimates for some years and that the estimate given in October 1996 simply replaced an earlier estimate. Further, the Respondent received correspondence on 18 October 1996 and 16 December 1996 indicating clearly that the family payment was being assessed on estimates, and further that she had a duty to notify the Applicant in particular circumstances, in particular as when the Respondent's combined income was likely to exceed $31,460 for financial year 1996/97. Further the Applicant argued that the Respondent was aware that she would have to pay tax on her superannuation withdrawal and with such knowledge (given at the SSAT hearing (T2, para 17)), it would have been appropriate for the Respondent to make an enquiry as to what effect it may have on family payments. In all these circumstances, the Applicant contends that the estimate provided by the Respondent in the annual Review Form completed and lodged in October 1996 by the Respondent, constitutes a request in terms of subsection 1069-H21 of the Act.

  12. The Respondent contends that there has been no action or circumstance which would permit the Applicant to move in assessing the rate of family payment from the base tax year to the current year. In particular it was contended that no notifiable or assumed notifiable events occurred during the relevant period of the debt and hence any move to assess the rate under current year income could not have been with reference to either subsections 1069-H16 or 1069-H18. Further there is in the Respondent's submission no evidence to support the contentions that subsection 1069-H21 has been satisfied, particularly where no proper request has been made. It is the Respondent's contention that in the situation where the Applicant has failed to comply with subsection 1069-H21, any decision purported to have been made is void. Similarly, as no decision has been effectively taken, no debt can accrue under subsection 1223(3) of the Act, as subsection 885(1) cannot apply. In short, the Secretary could not have regard to the current income year in working out the rate of family payment. Further, the Secretary could not have acted under section 878 of the Act, for prior to any such action under that section, the issue of bringing the use of an estimate into the equation would have had to be validly done pursuant to subsection 1069-H21 of the Act.

  13. It was submitted on behalf of the Respondent that the actions taken or omitted to be taken by the Applicant constituted an administrative error which resulted in an overpayment to the Respondent, and that these payments were received by the Respondent in good faith.  That in regards to the withdrawal from the superannuation funds it is submitted that the Respondent was unaware of the family payment consequences of that withdrawal, and that it certainly was not a notifiable event.
    CONSIDERATION AND FINDINGS

    19. Section 1069-H21 of the Act states:
              if:
    (a)       family allowance:

    (i)        is not payable to a person because of this Module; or

    (ii)       is payable at a reduced rate because of this Module; and
    (b)       the person gives the Secretary an estimate of the person's income for a tax year; and
    (c)       the person requests the Secretary to make a determination under this point; and
    (d)       the person agrees that person's rate of family allowance for that tax year is to be recalculated if the person's actual income for that tax year exceeds 110% of the amount estimated by that person;
    the Secretary must determine that the appropriate tax year, for the purpose of applying this Module to the person on or after the day on which the request is made, is the tax year in which the request is made.

  14. Section 1069-H22 states that any request made under section 1069-H21 must be made in writing.

  15. In turning to the evidence it is clear to the Tribunal on both the evidence of the Respondent and the documentation placed before the Tribunal that there was not a request made in writing by the Respondent which would satisfy section 1069-H21(c). The Tribunal notes the extensive arguments placed in submission by the Applicant that the Review Form lodged on 16 October 1996 by the Respondent constructively constitutes such an application in writing to satisfy section 1069-H21(c). The Tribunal cannot agree with such a construction for nowhere within the form are there words which even vaguely suggest that the Respondent is making a request in writing to the Secretary to determine family payment using the estimate given by the Respondent. As far as the Tribunal is concerned sections 1069-H21 and H22 state what and how it is to be done and unless done in the manner as prescribed by the Act, the Tribunal finds that any decision purported to have been made, is not a decision pursuant to or in accordance with the Act. As a consequence it is the Tribunal's finding that in such circumstances the proper and effective decision is one that provided for the calculation of family payment to be effected against the appropriate base tax year, unless there has been an assumed notifiable or an actual notifiable event which would cause recalculation against the current tax year.

  16. In further submissions by the Applicant, the Tribunal has had its attention directed to section 878 of the Act which provides:

    If the secretary is satisfied that the rate at which family allowance is being, or has been, paid is less than the rate provided by the Act, the Secretary is to determine that the rate is to be increased to the rate specified in the determination.

This provision, in the Tribunal's opinion is a general provision, which can only be utilised where a rate has been struck in accordance with the requirements of a particular provision (eg section 1069-H21) and there has been error in the calculation of the rate because of some specific reason. This general provision does not, in the Tribunal's view, grant a power at large to the Secretary to ignore specific detailed provisions nominated in the Act, which are in place to safeguard the rights and obligations of both parties. To suggest otherwise in the Tribunal's view is to ignore the overall construction of the Act and the necessary intent to clearly define the particular and general circumstances where the Secretary must act in accordance with the provisions of the Act.

  1. The Tribunal, having established that has been no decision made in this matter in accordance with the Act, notes that the period with which this matter is concerned traverses family payments for calendar years 1996 and 1997 and that the combined taxable incomes for family payment purposes or the two base years are $52,537 (94/95) and $35,827 (95/96). Further, the Tribunal observes that the combined taxable income for family payment purposes for financial year 1996/97 was $44,097. In turning to the effect of where no decision was made pursuant to or according to the Act (by legal error), any family payments made pursuant to that aberrant decision must constitute payments made as a result of administrative error. Further a reassessment of what payments should have been made in accordance with the Act should be undertaken to construct what, if any, overpayments have been made to the Respondent as a result of administrative error by the Applicant.

  2. In the event that there may have been an overpayment, the Tribunal moves to a consideration of whether waiver, in part or in whole, of any debt should occur. Preliminary to the issue of waiver is whether any overpayment to the Respondent, which is found to have occurred, does constitute a debt due and owing to the Commonwealth by the Respondent. It is the Tribunal's finding that any overpayment which is found to have occurred in this matter is a debt pursuant to subsection 1223(1) and/or (5) of the Act. The Tribunal further notes that pursuant to these latter two subsections, any debt can only commence to accrue after 1 October 1997.

  3. In returning to the issue of waiver, the Tribunal notes subsection 1237A(1) of the Act which provides

    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.

The Tribunal has already found that the Respondent played no part in the administrative error which has led to any overpayments or debt which are found to exist.  In making such a finding, the Tribunal did acknowledge that the Respondent had been in receipt of family payments calculated using estimates she had provided on more than one occasion, but did accept the evidence of the Respondent that at all times leading up to the completion of the Review Form in October 1996 that she was unaware that she was being paid family payments calculated from the use of her estimates.

  1. Arising out of these considerations and findings the Tribunal further finds that the administrative error was one due solely to the actions of the Applicant, for it was the Applicant's actions that instituted the payment of family payments based on the Respondent's estimates without satisfying the requirements of section 1069-H21.

  2. In the Tribunal's mind, the issue of the Respondent's good faith is a complex issue, as regards the receipt of all of the payments of family payments in the period 24 October 1996 to 23 October 1997 in so far as debt may arise as a result of any overpayment which may have occurred.  The Tribunal is of the mind that the Respondent was duly advised that she was being paid on an estimate in October and December 1996 and that as part of those notifications there was a requirement to notify the Applicant when combined taxable income for the year was likely to exceed $31,460.  Further the Tribunal is aware that the Respondent, while unaware as to what effect the $15,038 draw down from her superannuation fund would have on her family payment, was aware that she would have to pay tax on the money and therefore that it was taxable income.  The Tribunal notes that the draw down occurred on 28 November 1996, and that the Respondent made no attempt to ascertain as to what, if any, this amount of taxable money would have on her family payments.  The next event, which in the Tribunal's view is significant, is that the Respondent had acquired full knowledge of the combined taxable income for family purposes of $44,097 for financial year 1996/97 by 29 July 1997 or shortly thereafter.  The Tribunal further observes that the Respondent did not notify the Applicant of combined taxable income for financial year 1996/97 until she lodged a new form with the Applicant on 31 October 1997.

  3. The Tribunal, in considering the matter of good faith at the time of payment, is of the belief that the Respondent should have notified the Applicant within fourteen days of receiving her taxation return on 29 July 1997, and that any overpayments that may arise after that time and up to 23 October 1997, could not have been received in good faith, for she knowingly did not advise the Applicant that the combined taxable income for family purposes for financial year 1996/97 exceeded her notifiable figure of $31,460 for financial year 1996/97 and also exceeded her base year rate of $35,427 by more than 110%.  The Tribunal comes to this conclusion in the knowledge that notices which flowed to the Respondent in October and December 1996 and the Respondent, in the absence of any knowledge that such notices may be flawed for lack of proper authenticity, made no attempt to comply with the notification contained therein.
    29. The Tribunal, in considering the issue of the draw down from the superannuation fund notes that the Respondent was aware that such money was a taxable sum, and that she made no attempt and/or did not consider it necessary to seek information as to any effect it may have on her family payments.  It is clear to the Tribunal that the effect of the withdrawal was to increase the taxable income for the financial year significantly.  In Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127, the issue of good faith was canvassed, and in essence, the issue becomes one of whether at the time of payment the person knew or ought to have known that the payment was an appropriate payment. In the matter to hand the Tribunal finds that the Respondent knew that the superannuation payments constituted taxable income and without further enquiry continued to receive family payments with the knowledge that that the taxable income had increased significantly for financial year 1996/97. The Tribunal, while noting that the Respondent was unaware that such a withdrawal would effect family payment quantities, finds the inconsistency of knowledge that the withdrawal would affect taxable income and a purported absence of knowledge coupled with no attempt to seek information as to the effect of family payment as not consistent with an action or series of actions undertaken in good faith.

  1. The Tribunal's findings are summarised below:

(a)The action by the Applicant to calculate family payment to the Respondent based on an estimate did not satisfy the requirements of section 1069-H21 of the Act;

(b)The consequences of the Applicant's action to calculate family payment based on an estimate to the Respondent was a decision not taken pursuant to or in accordance with the Act;

(c)Payments made to the Respondent as a result of the nominated decision were made as a result of sole administrative error by the Applicant;

(d)As a result of any recalculation that is undertaken in accordance with the Act, any overpayment which may have occurred as a result of a comparison with what was paid by way of administrative error and what should have been paid is a debt due and owing by the Respondent to the Commonwealth;

(e)For the period 24 October 1996 to 30 September 1997 pursuant to subsection 1223(1) and/or (5), a debt cannot be raised, as any amount not payable can only commence to accrue as a debt after 10 October 1997.

(f)Where a debt is found to exist, waiver could only occur for that part of the debt which accrues between 24 October 1996 and 28 November 1996, for during this period the Respondent received such payments in good faith; and

(g)For the period 1 October 1997 to 23 October 1997, any debt which may have accrued during this period as the result of the calculation is due and payable, for during this period there was an absence of reception of such payments in good faith.

DETERMINATION

  1. The Tribunal determines that the decision under review be set aside and in substitution therefor determines that:

(a)The decision to calculate family payments based on an estimate was not in accordance with the Act;

(b)Remits the matter to the Applicant to

(i)Calculate the quantum of family payments that should have been paid to the Respondent according to law;

(ii)Calculate whether an overpayment has been made, with both the calculation and the derived calculation being for the period 24 October 1996 to 23 October 1997;

(c)If any overpayment is found to exist as a result of actions undertaken in (b), then this is a debt due and payable by the Respondent to the Commonwealth;

(d)That any debt can only commence to accrue after 1 October 1997.

(e)Any debt found to be owed and payable by the Respondent for the period 24 October 1996 to 28 November 1996 could be waived if it were found to exist; and

(f)Any debt found to exist in relation to overpayment for the period 1 October 1997 to 23 October 1997 is due and payable by the Respondent.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of DR JD CAMPBELL

Signed:         .....................................................................................
  Associate

Date of Hearing:  6 June 2000      
Date of Decision:  1 August 2000
Representative for the Applicant:    Cheryl Collis                   
Representative for the Respondent:  Sally Harcombe  

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