Hayek and Secretary, Department of Family and Community Services
[2004] AATA 558
•2 June 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 558
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2004/92
GENERAL ADMINISTRATIVE DIVISION )
Re REBECCA HAYEK Applicant
And
SECRETARY, DEPARTMENT
OF FAMILY AND COMMUNITY SERVICESRespondent
DECISION
Tribunal Mr RG Kenny, Member Date2 June 2004
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ....................[Sgd].....................
RG Kenny
Member
CATCHWORDS
SOCIAL SECURITY – benefits and entitlements - newstart allowance – overpayment - applicant a beneficiary of a family trust – annual distributions from the trust taken to be received over 12 months – failure by applicant to advise of trust disbursements – advances on loan account – loans to applicant comprising financial assets – deemed income from assets - no grounds for waiver of debt – decision affirmed
Social Security Act 1991 ss 8, 1122, 1223(1), 1223(5), 1073, 1076, 1223, 1237A, 1237AAD
Re Duckworth and Secretary, Department of Social Security (1995) 39 ALD 674
Beadle v Director-General of Social Security (1985) 60 ALR 225
Secretary, Department of Social Security v Hales [1998] FCR 162
Re Beadle and Director-General of Social Security (1984) 1 AAR 362REASONS FOR DECISION
2 June 2004 Mr RG Kenny, Member 1. In 2000, 2001 and 2002, Rebecca Hayek (the applicant) lived in Mt Isa but, periodically, travelled to Melbourne where she was engaged in the operation of a family restaurant business. When she was in Melbourne, she made no claim for and did not receive any income support payments under the Social Security Act 1991 (the Act) but, on return to Mt Isa, she received newstart allowance under the Act.
2. On 26 May 2003, a delegate of Centrelink, on behalf of the Secretary, Department of Family and Community Services (the respondent), determined that the applicant had been overpaid her allowance in the amounts of $1,218.16 for the period from 1 August 2000 until 23 October 2000; $8,408.90 in the period from 15 May 2001 until 18 March 2002; and $93.56 in the period from 7 September 2002 until 13 December 2002. That decision was affirmed by an authorised review officer on 8 October 2003 and, on 15 December 2003, the Social Security Appeals Tribunal (SSAT) affirmed the decision in respect of the first and second mentioned debts but set aside the decision in respect of the third period and referred the matter back to the respondent to recalculate the level of the debt on the basis of the level of the applicant’s assets at the time.
3. On 5 February 2004, an application for review of the SSAT decision was received by the Administrative Appeals Tribunal (the Tribunal). In the meantime, the respondent, in accordance with the reference by the SSAT, recalculated the amount of overpayment in the period from 7 September 2002 until 13 December 2002 at $58.26.
4. The applicant attended the hearing but was not represented. The respondent was represented by Ms J Hamilton. The following material was taken into evidence:
Exhibit 1- the documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (T1 – T31);
Exhibit 2- a computer printout of the applicant’s initial claim for newstart allowance; and
Exhibit 3- documents relating to the applicant’s financial circumstances provided by her accountant, Mr R Clarke.
Evidence and Contentions
5. It is not disputed by the applicant in this matter that she was the beneficiary of the Marbek Family Trust or that trust distributions were paid into her beneficiary loan account in the amounts of $10,000 on 30 June 2000 and in the amount of $40,000 on 30 June 2001. Further, the applicant does not dispute that she did not advise the respondent of the receipt of these amounts or that she received payments of newstart allowance in the periods referred to above. Her application to review the decision was based on her understanding that the amounts paid into her beneficiary loan account did not constitute income and that, therefore, they should not be taken into account in calculating the level of her newstart allowance. She said that, whenever she began working in her father’s restaurant, she immediately notified the respondent so that her newstart allowance could be cancelled and she would then re-apply for reinstatement as a newstart allowance recipient when her employment finished. She said she had not earned any income during the periods when she was in receipt of newstart allowance as she had not been employed in the restaurant business during those times.
6. The applicant conceded that, in the event that the amounts paid into her beneficiary loan account did constitute income in her hands, the calculations by Centrelink had been correctly made and that the amounts of overpayments alleged against her were debts due by her to the Commonwealth. She also conceded that, in September 2002 when she began to receive newstart allowance, the amount standing to her credit in the beneficiary loan account was in the amount of $38,963.
7. The applicant said she was no longer in receipt of any income support payments from the respondent and was making repayments of the debts in the amount of $10 per week and that the amount of the debt was in the order of $9,000. She said that her current financial needs were being met by her family and that, in the event that the decision under review was affirmed, she would repay the monies immediately. She also said she was in good health and that there were no particular circumstances she wanted the Tribunal to take into account in determining whether the debt should be waived.
8. For the respondent, Ms Hamilton submitted that the distribution of trust monies into the applicant’s loan account constituted income for the purposes of the Act and that, because of the nature of that income, it had to be distributed, for assessment purposes, over the twelve month period following its distribution. She submitted, when this was done, the application of the income test meant that the level of newstart allowance paid to the applicant was greater than her entitlement in the periods from 1 August 2000 to 23 October 2000 in the amount of $1,218.16 and in the period from 15 May 2001 until 18 March 2002 in the amount of $8,408.90.
9. In relation to the third period of overpayment, Ms Hamilton submitted that this was based upon the financial assets of the applicant and deemed income which was assessed on the balance of the loan account. She submitted that, from the period when payments began in September 2002, the loan balance was $38,963 and that the deemed income applicable to that amount meant the applicant was overpaid newstart allowance in the amount of $58.26 in the period from 7 September 2002 until 13 December 2002.
10. Ms Hamilton submitted that the amounts paid to the applicant in excess of her entitlements were debts which were due by her to the Commonwealth and she also submitted there was no basis for these debts to be waived.
Consideration
11. The applicant’s parents, Nagi Hayek and Gloria Hayek, are directors of the family company Modran Pty Ltd which is trustee for the Marbek Family Trust of which the applicant and her siblings are beneficiaries (see T10-T11). The documentation provided by the applicant’s accountant, Mr Clarke (Exhibit 3), include minutes of the meeting of directors of Modran Pty Ltd on 30 June 2000 and 30 June 2001, respectively, in which it is noted that there were resolutions to distribute and appropriate income derived by the company as trustee for the Marbek Family Trust to the applicant in the amounts of $10,000 and $40,000 respectively. It was noted that this was because of her contribution to the running of the Lobster Cove Seafood Restaurant and that the distributions were to be effected by crediting the amounts to her beneficiary account in the books of the trust.
12. I am satisfied that those amounts constitute “income”, as that term is generally defined in subsection 8(1) of the Act in that it constituted an amount received by her, albeit in the form of a trust distribution. I am also satisfied that these amounts were received by the applicant on the dates of the respective distributions, that is, $10,000 on 30 June 2000 and $40,000 on 30 June 2001: see Re Duckworth and Secretary, Department of Social Security (1995) 39 ALD 674 at 677.
13. The rate of payment of newstart allowance is calculated in accordance with the terms of section 1068 of the Act and consideration must be given to the income levels of the applicant during the periods when she received newstart allowance. In calculating the level of income of the applicant for that purpose, reference must be made to the terms of subsection 1073(1) of the Act which reads:
“Subject to points 1067G-H5 to 1067G-H20 (inclusive), 1067L-D4 to 1067L-D16 (inclusive), 1068-G7AA to 1068-G7AR (inclusive), 1068A-E2 to 1068A-E12 (inclusive) and 1068B-D7 to 1068B-D18 (inclusive), if a person receives, whether before or after the commencement of this section, an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part; and
(b) is not:
(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum;
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.”
14. In this case, while the amounts credited to the applicant’s loan account in the trust constitute income under the general definition given in subsection 8(1) of the Act, they do not meet the more specific descriptions given in paragraphs 1073(1)(a) or (b) of the Act. This means that the applicant must be taken to have received 1/52nd of the respective amounts over each of the twelve month periods following her receipt of those sums into her loan account.
15. The applicant has not disputed the calculations made by the respondent which led to the overpayments. For the period from 1 August 2000 until 23 October 2000, these are set out at T18/101-106 and, for the period from 15 May 2001 until 18 March 2002, they are set out at T18/107-15. I am satisfied that those calculations have been made in accordance with the rate calculator in section 1068 of the Act and the attribution process provided for in subsection 1073(1) of the Act, as noted above. I am also satisfied that the applicant was overpaid newstart allowance in the amounts of $1,218.16 and $8,408.90 in those respective periods.
16. In relation to the third debt period from 7 September 2002 until 13 December 2002, calculations were based on the level of the assets of the applicant at the beginning of that period. The respondent relied upon the amounts in the applicant’s loan account in the Marbek Family Trust. In that regard, section 1122 of the Act reads:
“If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.”
17. I am satisfied that the amounts standing to the applicant’s credit in that loan account in the period from 7 September 2002 until 13 December 2002 constituted a financial investment and, therefore, a financial asset as defined in subsection 9(1) of the Act which, insofar as relevant, reads:
“financial investment means: …
(e) a loan that has not been repaid in full; or
…
financial asset means:
(a) a financial investment; or …”
18. In accordance with subsection 1076(2) of the Act, a person who has financial assets is taken to receive ordinary income on those assets in accordance with the remainder of that provision. Based on the information provided by Mr Clarke, I am satisfied that the amount standing to the applicant’s credit in the loan account as at the commencement of the third period of overpayment was $38,963. I am also satisfied that the calculations of the applicant’s entitlements to newstart allowance during that period, as reproduced at T29/147-152, correctly reveal that the applicant was overpaid the amount of $58.26 by way of newstart allowance during that time.
19. On the basis of those findings, I am satisfied that the applicant has been overpaid newstart allowance in the amount of $1,218.16 for the period 1 August 2000 until 23 October 2000; in the amount of $8,408.90 for the period 15 May 2001 until 18 March 2002; and in the amount of $58.26 for the period 7 September 2002 until 13 December 2002.
20. I have noted the applicant’s contention that the monies that she received should not be treated as income. However, in this matter, the applicant and her family elected to conduct their financial affairs through the auspices of a family trust and this means that the provisions, outlined above, have to be applied.
21. Provision is made for overpayments of newstart allowance to constitute debts due to the Commonwealth. Prior to 1 July 2001, the relevant provision was subsection 1223(5) of the Act and, since then, the relevant provision has been subsection 1223(1) of the Act. These read:
“1223(1) Subject to this section, if:
(a) a social security is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
…
1223(5) If:
(a)an amount (the received amount) has been paid to a person by way of social security payment on or after 1 October 1997 or by way of fares allowances; and
(b)because the received amount had not been correctly calculated using the relevant rate calculator or other provision for calculating the amount, or for any other reason, the received amount is greater than the amount (the correct amount) of social security payment or fares allowances that should have been paid to the person;
the difference between the received amount and the correct amount is a debt due to the Commonwealth.”
22. I am satisfied that the overpayments of newstart allowance to the applicant constitute debts, as provided by those provisions in their respective timeframes, due by the applicant to the Commonwealth.
23. Provision is also made for debts to be waived in certain circumstances. In that regard, sections 1237A and 1237AAD of the Act read:
“Waiver of debt arising from error
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.
Underestimating value of property
1237A(2) If:
(a)a debt arose because the debtor or the debtor's partner underestimated the value of particular property of the debtor or partner; and
(b) the estimate was made in good faith; and
(c)the value of the property was not able to be easily determined when the estimate was made;
the Secretary must waive the right to recover the proportion of the debt attributable to the underestimate.
…
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.”
24. In this case, the applicant was sent periodic notices requiring her to advise of her income levels during the periods she received newstart allowance and, while I am satisfied that she was of the belief that the disbursements to the loan account by the family trust did not constitute income in her hands, those notices, nevertheless, required her to advise if she received any one of a wide range of defined forms of payments including monies by way of a lump sum. Whilst the first of the trust disbursements occurred whilst the applicant was not receiving newstart allowance, that was not the case with the second disbursement on 30 June 2001. In any event, I am satisfied that the debts owed by the applicant did not arise through administrative error made by the Commonwealth and, therefore, the debt may not be waived under section 1237A of the Act.
25. In relation to the terms of section 1237AAD of the Act, the concept of special circumstances has been the subject of consideration in a range of legislative provisions relating to Social Security law: see Beadle v Director-General of Social Security (1985) 60 ALR 225 and Secretary, Department of Social Security v Hales [1998] FCR 162 in the context of the Act. In the latter case, French J referred to the purpose of the waiver provision in that Act as being:
“To enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing an narrow or artificial construction upon the words.”
26. In Beadle v Director-General of Social Security (above), the Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term and 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 228). 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 be “unusual, uncommon or exceptional” and must have a “particular quality of unusualness that permits them to be described as special”.
27. While I am satisfied that the applicant did not knowingly make a false statement or false representation to the respondent or knowingly fail to comply with a provision of the Act, it was her evidence that she was in a position to repay the debts in the event that the decision was adverse to her. I am satisfied that there are no special circumstances that would make it desirable to waive the debts in this case in accordance with section 1237AAD of the Act.
Decision
28. The Tribunal affirms the decision under review.
I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member
Signed: Sarah Oliver
AssociateDate of Hearing 21 May 2004
Date of Decision 2 June 2004The Applicant appeared in person
For the Respondent Ms J Hamilton, Departmental Advocate
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