Hilman and Secretary, Department of Social Services (Social security)

Hilman and Secretary, Department of Social Services (Social security) [2024] ARTA 547 (11 December 2024)

Applicant/s: Miss Hilman

Respondent: Secretary, Department of Social Services

Chief Executive Centrelink

Tribunal Numbers: 2023/A183587, 2024/A191372 and 2024/A191373

Tribunal: Member A Byers
Place:Brisbane
Date:11 December 2024

Decision:

The Tribunal sets aside the decision under review relating to Debt 1 (as designated in the Reasons) and remits the matter for reconsideration in accordance with the order that the debt is to be recalculated in accordance with (in particular) paragraphs 85 to 92 of the Reasons. The recalculated debt is to be recovered.

The Tribunal affirms the decision under review relating to Debt 2 (as designated in the Reasons).The associated interest charge debt, as varied by the authorised review officer, is set aside and the decision substituted that Miss Hilman was exempt from interest charges from 26 July 2018 to 15 January 2019.

The Tribunal sets aside the decision under review relating to Debt 3 (as designated in the Reasons) and substitutes the decision that there is no debt (which also removes an associated interest charge debt).

CATCHWORDS

SOCIAL SECURITY – Newstart Allowance – overpayment – recovery fees – recovery amounts exceeding the Court’s reparation figure – special circumstances – income test – income as first earned, derived or received – earned income – recalculation of interest charges – knowingly providing a false statement or representation – decision under review set aside

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.

Statement of Reasons

BACKGROUND

On 21 October 2016, 5 December 2017 and 8 December 2017 respectively Centrelink raised the following newstart allowance debts against Miss Hilman:
-   $38,450.80 from 29 August 2011 to 29 June 2015, including a 10% recovery fee of $3,429.99 (Debt 1);
-   $18,563.38 from 30 June 2015 to 14 January 2017, including a 10% recovery fee of $1,683.50 (Debt 2); and
-   $389.62 from 18 June 2013 to 30 June 2014 (Debt 3).
Centrelink has also charged interest on these debts said to be due to Miss Hilman’s failure at times to enter a repayment arrangement. Regarding Debt 2, interest charges totalling $809.84 were applied from 26 July 2018 to 15 January 2019. Regarding Debt 3, interest charges totalling $17 were applied from 26 June 2018 to 15 January 2019. The interest relating to Debt 1 was charged after an authorised review officer’s intervention on 11 March 2017 and is referred to below.
According to Centrelink records, the debts follow data-match information from the Australian Taxation Office (ATO), which was later supplemented with payment information from [Employer 1] and [Employer 2]. It appears Centrelink also received details from [Employer 2a], although it is evident this is the same employer entity as [Employer 2].
Regarding Debt 1, the authorised review officer reduced the debt to $31,725.01 from 31 May 2011 to 29 June 2015. A 10% recovery fee of $3,172.50 was added bringing the total to $34,897.51. As I understand the authorised review officer, the change resulted from earnings details provided by [Employer 1] and [Employer 2], which I presume means the original calculations were based on the former unlawful approach of averaging PAYG summary information from the ATO.
Debts 2 and 3 were reviewed by another authorised review officer on 29 August 2024.
The authorised review officer increased Debt 2 to $17,233.08 from 30 June 2015 to 14 January 2017. A 10% recovery fee of $1,720.30 was added bringing the total to $18,956.38.
The authorised review officer indicated the adjustment to Debt 2 involved a different calculation methodology. As Miss Hilman’s pay periods did not match her newstart allowance instalment fortnights, the original calculations apportioned the earnings that cut across each instalment fortnight on the assumption that the earnings were uniformly derived in each day of the pay period. Instead, the recalculation involves “the dates paid method”. Essentially, this involves taking a wage figure into account in the benefit instalment period in which the wage is paid.
The authorised review officer also decided the interest figure required adjusting because of the changed debt figure and also because interest was wrongly charged from 19 October 2018 to 15 January 2019 when Miss Hilman was in prison.
According to the officer who raised Debt 3, on 26 June 2013 [Employer 2] made a payment of $928.67 into Miss Hilman’s bank account, which they assessed as income over a period of 52 weeks from the date of receipt. An employer report from [Employer 2] of 5 February 2017 indicates the payment was made in error after Miss Hilman’s contract was finished and could not be recovered. That is to say, the payment is one to which Miss Hilman had no entitlement and is a debt to [Employer 2].

10. The authorised review officer increased Debt 3 to $424.09 from 26 June 2013 to 30 June 2014. The authorised review officer notes the payment just referred to but also states that the increase resulted from [Employer 1] earnings previously apportioned (as described above) and subsequently reassessed using “the dates paid method”.

11. As [Employer 1] earnings during the period covered by Debt 3 were included in Debt 1 and are not referred to by the officer who calculated Debt 3, it is not clear (to me) what role those earnings are supposed to have played in Debt 3.

12. The authorised review officer also decided that interest was again wrongly charged from 19 October 2018 to 15 January 2019 because Miss Hilman was in prison.

13. Miss Hilman has sought review of the authorised review officers’ decisions by the Administrative Appeals Tribunal (AAT) and the matter was heard in Brisbane by telephone on 5 December 2024. Miss Hilman provided sworn evidence.

14. From 14 October 2024, the AAT became the Administrative Review Tribunal (the Tribunal). Under the relevant transitional provisions, applications for review not finalised before 14 October 2024 are taken to be an application for review to the Tribunal. The transitional provisions enable the Tribunal to continue and finalise any aspect of a review not already completed by the AAT. This decision and statement of reasons is accordingly made by the Tribunal.

ISSUES

15. Part of Miss Hilman’s reasons for seeking a review is that she was found guilty of various offences relating to the debts under review by [Court 1] [in] October 2018. According to the formal record, Miss Hilman pleaded guilty under subsection 135.2(1) of the Criminal Code Act 1995 (the Criminal Code Act) to [number] offences said to have been committed between 21 May 2012 and 23 January 2017. Each offence involved Miss Hilman obtaining a financial advantage from the Commonwealth with the knowledge or belief that she was not eligible to receive that financial advantage.

16. The [Court 1] ordered Miss Hilman to pay the Commonwealth reparation of $16,395.12 in addition to serving a prison term of three months. The question Miss Hilman raises is whether Centrelink is lawfully able to recover anything exceeding the reparation figure.

17. Miss Hilman also submits that there are special circumstances in her case warranting the waiver of all or part of the debts.

18. The Ombudsman has raised concerns about the lawfulness of the apportionment methodology referred to above and it appears from the Department’s approach in Lyall and Secretary, Department of Social Services [2023] AATA 3356 and in the recent decision Secretary, Department of Social Services and FTXB [2024] AATA 3021 that it has in response adopted the alternate “dates paid method”. In a recently published statement, the Secretary has confirmed that he will not be adopting the approach favoured in FTXB.

19. The Tribunal in FTXB comprised the President, Kyrou J, and two Senior Members. Although the Tribunal dealt with a youth allowance matter, due to similarities in the youth allowance and newstart allowance income tests and mutual issues involving when employment income is earned, the analysis in FTXB is directly relevant to the present matter.

20. These matters will be considered in detail below. Unless otherwise stated, all references below are to the Social Security Act 1991 as it applied during the debt period and prior to 7 December 2020. The position changed on this date with the substantial amendment of section 1073B.

CONSIDERATION

(1) Does the [Court 1] reparation order determine the amount recoverable?

21. As indicated, Miss Hilman submits that the total debt figure recoverable is the reparation figure of $16,395.12 the [Court 1] ordered she pay, not the debt totals as outlined above.

22. As indicated in the [Court 1] order, reparation orders in relation to federal offences may be made in relation to convictions under subparagraph 20(1)(b) of the Crimes Act 1914. This provision applies where a person is convicted but the court decides to release them after a specified time subject to the payment of a security.

23. Section 21B provides, as far as is relevant:[1]

[1] An analysis by the National Judicial College of Australia of reparation orders under this provision can be found at for offences

(1) Where:

(a) a person is convicted of a federal offence …
the court may, in addition to the penalty, if any, imposed upon the person, order the offender …
(c) to make reparation to the Commonwealth or to a public authority under the Commonwealth, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth or the authority, as the case may be, by reason of the offence …
(2) …
(3) Where:

(a) the court orders a federal offender to make reparation to the Commonwealth, to a public authority of the Commonwealth or to any other person by way of payment of an amount of money; and
(b) the clerk, or other appropriate officer, of the court signs a certificate specifying:
(i) the amount of money to be paid by way of reparation; and
(ii) the identity of the person to whom the amount of money is to be paid; and
(iii) the identity of the person by whom the amount is to be paid; and

(c) the certificate is filed in a court (which may be the first‑mentioned court) having civil jurisdiction to the extent of the amount to be paid;
the certificate is enforceable in all respects as a final judgment of the court in which it is filed in favour of the Commonwealth, of that public authority or of that person.

24. There is nothing in these provisions or in the social security law to suggest that a court can determine a debt figure that is contrary to the figure derived in accordance with the social security law.

25. That said, I note that in Secretary, Department of Social Security and Wornes [1997] AATA 476 the Senior Member held that the outcome depends on the intention of the court. The result in that case was that the reparation order was held to be determinative of a much larger social security debt. This result obviously included the notion that a court can separately determine the recoverable amount of a social security debt using considerations other than those prescribed in the social security law.

26. In Wornes it appears the Senior Member was convinced by the sentencing judge’s reasons. In short, the social security debt in round figures was calculated to be $49,000. The judge adjourned the hearing to have Centrelink calculate Mrs Wornes’ notional entitlement to another social security payment, which was worked out to be $27,000. The judge then indicated that: “It could be therefore said that the Department was not defrauded of $49,000 but of approximately $22,000, being the difference between $49,000 and $27,000”. The reparation order was framed in terms of repayments of $100 per week over the balance of a five-year recognisance period, which apparently totalled $20,800.

The AAT essentially concluded it was the judge’s intention that the recoverable debt was $20,800. With respect, I am not satisfied this conclusion follows. What can be concluded is that the court was prepared to enforce the notional amount that was due to fraud.

28. My view is that the recoverable debts in the present case are those raised in accordance with the social security law. Although it appears the rather precise reparation figure was calculated with specific considerations in mind, I am satisfied those considerations relate to the question of fraud before the court and are not intended to (and cannot) overrule the relevant provisions in the social security law.

29. What the correct overpayment figures are under the social security law remains to be considered.

(2) The newstart allowance income test

30. The income test for newstart allowance is found in Module G of section 1068. Prior to 7 December 2020, a person's ordinary income was to be worked out on a fortnightly basis and “is to be taken into account in the fortnight in which it is first earned, derived or received” (point 1068-G7A).[2] The reference here to a fortnight is plainly intended to include a benefit fortnight.

[2] In FTXB the Tribunal dealt with the same words found in point 1067G-H23.

(3) The meaning of ‘first earned, derived or received’

(3)(a) The ‘orthodox’ analysis

31. As noted, a person's ordinary income was to be worked out on a fortnightly basis. In relation to newstart allowance, this is provided for under Step 1 in the Method statement in point 1068-G1. Just as income taken on a yearly basis does not mean annual income (in relation to the pension income test), income taken on a fortnightly basis does not mean fortnightly income. For example, if a person earns $1,000 over five fortnights it can be said their income on a fortnightly basis over this period is $200, even if they never earned $200 in any one of the fortnights.

32. Point 1068-G7A applies the methodology of calculating income on a fortnightly basis to particular fortnights. A particular fortnight is the one in which a particular amount of ordinary income is first earned, derived or received. A particular fortnight will typically be a particular benefit fortnight.

33. In point 1068-G7A, the adjective ‘first’ plainly has a temporal meaning and specifically modifies the composite disjunct ‘earned, derived or received’. Thus, ‘first earned, derived or received’ means first earned, first derived or first received and the identifiable fortnight (the benefit fortnight) is that in which income worked out on a fortnightly basis is first earned, first derived, or first received (and not a different fortnight).[3]

[3] In FTXB the Tribunal notes at paragraph 92 that this was also the position of both parties.

34. Point 1068-G7A is disjunctive but there is no discretionary language in the provision. Accordingly, the provision does not contain a discretion to choose whether income will be taken into account when first earned, when first derived or when first received.

35. All income that is earned or derived is also received. To avoid double-counting ordinary income, the presumption in point 1068-G7A must be that income that is earned, derived or received is to be taken into account once, either when it is earned, when it is derived, or when it is received.

36. As point 1068-G7A does not contain a discretion to choose the benefit fortnight an amount of earned/derived income is to be applied to, this must be determinable from a proper construction of point 1068-G7A – i.e., the relevant fortnight is fixed by the meaning of the words in point 1068-G7A (which can be ascertained if necessary by having regard to statutory context and statutory rules).

37. It follows that, if an income amount is to be applied to the benefit fortnight when first received, this is because, as a matter of the construction of point 1068-G7A, all received income is to be applied in the fortnight received. It further follows on this principle that, as all earned/derived income is received, to avoid double-counting earned/derived income could never be applied in the benefit fortnight earned/derived (unless by coincidence income was both earned and received in the same fortnight). That is, the options of “earned or derived” in point 1068-G7A would have no separate application.

38. Adopting the statutory rule that statutory provisions do not contain redundancies, in order that each disjunct in point 1068-G7A has application, earned/derived income is taken into account when earned/derived.

39. The inevitable conclusion is that point 1068-G7A means that earned/derived income is taken into account in the fortnight it is first earned/derived (and not another fortnight). Received income that is neither earned nor derived is taken into account in the fortnight it is first received (and not another fortnight). This can conveniently be referred to as the orthodox analysis.[4]

[4] Prior to December 2020, the Social Security Guide provided at 4.3.3.40 that income from casual earnings is “assessed in the actual fortnight it is earned or derived, not in the fortnight it is received”. This approach was then applied to overpayments, where at 6.3.2 the Guide provided that “[c]asual earnings must be declared in the fortnight they have been earned regardless of whether they have actually received it or not”.

For completeness, I note the Guide at 4.3.3.05 provided that, “as a matter of policy”, the income test assessment for benefits is generally based on whichever event occurs first, which is usually when people earn the money. To reconcile these positions, it appears that, although recipients were required to declare casual earnings when the work was performed, the policy included an element of pragmatism to address possible fringe cases “where it is not practical or possible to assess earnings when the amount is earned”.

40. On my understanding, the Tribunal reached a different conclusion in FTXB. At paragraph 130 the Tribunal states:

For the purposes of point H23, it is clear that ‘first’ has a temporal connotation in the sense that, if ordinary income is ‘earned’ ‘derived’ or ‘received’ in different fortnights, it must be taken into account in the fortnight in which the first of those events occurs. This interpretation of the word ‘first’ is consistent with the common position in the parties’ submissions referred to at [paragraph 92] above.

41. This view is then more formally stated at paragraph 150. As indicated in footnote 3 above, the position of both parties (and that adopted in these Reasons) is that ‘first earned, derived or received’ means first earned, first derived or first received. It appears, with respect, that this construction of ‘first earned, derived or received’ is not logically consistent with the Tribunal’s construction. In particular, in the context of point 1068-G7A, the fortnight in which an income amount is first earned, first derived or first received logically identifies three fortnights (which, depending on the facts, may or may not coincide). On the other hand, the Tribunal’s view logically identifies only one fortnight, namely, the fortnight coinciding with whichever event (the earning, deriving or receiving) occurred first.

42. In my view, had Parliament intended the composite term ‘is to be taken into account in the fortnight in which it is first earned, derived or received’ to mean is taken into account in the fortnight it is earned, derived or received, whichever event occurs first, it would have been a simple enough matter to draft the provision in these terms.[5]

[5] As noted at paragraph 49 below, the benefit income test in section 122 of the Social Security Act 1947 did not include the word ‘first’. As it was not Parliament’s intention to change the social security law with the redrafting in 1991 of the current Act (see e.g., the observations of the Full Bench of the Federal Court in Secretary, Department of Family & Community Services v Rolley [2000] FCA 806), an analysis of point 1068-G7A should reflect to the extent possible the meaning of section 122. This, in my view, is better achieved by the orthodox analysis in that the word ‘first’ functions to make clear that an income amount is to be taken into account in the fortnight when first earned, first derived or first received and not an earlier or later fortnight. This was already the understanding adopted under the 1947 Act.

43. I think there is clear judicial support for the orthodox analysis. In Inguanti v Secretary, Department of Social Security (1988) 15 ALD 348, Sheppard J considered the operation of the pension income test under the Social Security Act 1947 (the 1947 Act). In short, Sheppard J had to consider the effect on Mr Inguanti’s age pension entitlement of an Italian pension that he had a present entitlement to but that would not commence being paid to him until some future time.

44. The rate of pension payable was prescribed in section 28 of the 1947 Act (as it was numbered when the decision under review was made). Subsection 28(2) contained an income test based on a recipient’s annual rate of income. Income was defined in section 2 of the 1947 Act (later renumbered as section 3) in materially the same terms as found in section 8 of the present Act as personal earnings, moneys, valuable consideration or profits earned, derived or received by a person for their own use or benefit.

45. Having formed the view that Mr Inguanti was deriving income not yet received, Sheppard J made two important logically related observations. The first was that:

In the submissions of counsel for the applicant there are a number of propositions which suggest that, if one gives to the word "derived" the meaning which I think it has, difficulty will be created when the pension is actually received. It is suggested that it will be necessary for the Director-General to take the pension into account twice, once when the entitlement arises and once more when the pension is paid. I do not agree with this. It is to be taken into account once and for all when it is derived. It will not be taken into account again when it is actually received.

46. Thus, although Mr Inguanti was receiving no present benefit from the Italian pension and would not do so until a future time, not then immediately ascertainable, the deciding factor was that the pension was being derived. As to why this was, in circumstances where there was plainly a prima facie option at least to choose the time of receipt, an obvious answer is that Sheppard J’s view was that, as a matter of the construction of the composite term ‘earned, derived, or received’ in the context of the pension income test, where income is derived it is to be taken into account when derived. Where income is derived, it is not as a matter of construction taken into account when it is received.

47. The second and related observation concerns a view that there is a discretion in the pension income test to take income into account either when it is derived or when it is received:

Two arguments based on a discretion vested in the Director-General, and thus in the Administrative Appeals Tribunal were also relied upon. The first of these was that the use of the words "earned", "derived" and "received" vested in the Director-General a discretion not to regard the income as relevant to be taken into account when it was actually received. It was said that the Tribunal should have exercised this discretion and decided that the amount of the pension should not be taken into account at this stage. The Tribunal said, correctly in my opinion, that it had no discretion.

48. The two observations are logically connected in that, if, as a matter of construction, derived income must be taken into account when derived, there cannot then exist a discretion (or an option or choice) to take it into account when received. Conversely, if there is no discretion to choose between when income is derived and received, this must derive from the meaning of the composite term ‘earned, derived, or received’ as it appears in the relevant income test.

49. The above analysis would have applied equally to social security benefits in the 1947 Act. In this regard, section 122 of the 1947 Act, which contained the income test for unemployment and sickness benefits, was based on “income” and therefore likewise relied on the definition of income in section 3 (as renumbered):

122. (1) Subject to subsection (2), where an unemployment benefit or a sickness benefit is payable to a person whose income exceeds $60 per fortnight, the rate per week of that benefit shall be reduced …

50. Although Inguanti involved the 1947 Act, it was cited and followed in Secretary, Department of Social Security v Pellone [1993] FCA 568. This matter involved a very similar situation under the current Act, where Mrs Pellone was granted an Italian survivor’s pension in circumstances where it had not yet been paid. Olney J restored the authorised review officer’s decision that the pension was to be taken into account as derived income.[6]

[6] Further to footnote 5 above, as to the relevance of decisions made under the 1947 Act, the Full Bench in Rolley confirmed that the principles in Harris v Director-General of Social Security [1985] HCA 1, covering the application of the pension income test in section 28 of the 1947 Act, applied to the current Act.

51. I think that, on any view (and consistent with Inguanti), an attempt to construe a statutory provision as harbouring a discretion to use considerations extraneous to the provision must fail if the provision itself (or some other directly related provision) does not plainly authorise that discretion. Clearly, although disjunctive, as noted earlier, point 1068-G7A does not contain any words indicating the existence of a discretion.

52. The role of a discretionary provision is to allow a decision-maker to consider extraneous matters not otherwise permitted by the confines of the language of the provision. Looking ahead, as there is nothing in the wording of the benefit income test that relates to the relevance or application of evidence about earnings, a decision to use evidence as a basis for choosing between alternatives effectively amounts to exercising an impermissible discretion. That is, an election to use the best available evidence of earnings as a way of choosing which alternative in point 1068-G7A is to apply, involves a discretionary exercise using an extraneous consideration (namely, evidence) not authorised by this provision.

(3)(b) The Department’s position

53. As I understand things (and as appears from FTXB), the Department’s current view of point 1068-G7A as it stood prior to 7 December 2020 (which I will refer to as the ‘receipt view’) can be paraphrased in the following way:

Point 1068-G7A requires a decision-maker to ascertain the fortnight in which income is first earned, derived or received. Where there is probative evidence regarding when ordinary income was earned, for example, records showing a daily breakdown of earnings in a newstart allowance instalment fortnight, then the decision-maker can use this evidence to make a finding of fact that the income was first earned in that fortnight.
However, where there is insufficient evidence of the daily breakdown of earnings in an instalment fortnight, but there is sufficient evidence of when the earnings were received, the decision-maker can find as a fact that the earnings were received in that instalment fortnight. That is, if the decision-maker considers the best evidence before them is when earnings were received, then those earnings are applied to the corresponding instalment fortnight, irrespective of when earned.

54. I am not aware of any authority cited for this view, or of any analysis showing why the orthodox position is incorrect.

55. There appears no attempt here (or nothing I can identify) to construe point 1068-G7A. If the paraphrase is an attempt at construction, it would amount to something like: the words in point 1068-G7A mean income is taken into account in the first fortnight in which there is probative evidence about when it is first earned, derived or received. If this is the intended construction, the obvious point is that (like most substantive provisions) the words in point 1068-G7A do not include words relating to evidence. Nor do the words used entail anything to do with evidence.

56. In any event, if there is probative evidence both about when income was earned and when it was received, on the receipt view one alternative would need to apply as a matter of the construction of point 1068-G7A. This is on the footing noted earlier that it would be untenable to double-count a recipient’s earned income by taking it into account when earned and again when received.

57. The Department’s more recent response to this problem for the receipt view (and the position put by the Applicant in FTXB) can be paraphrased as follows:

Where there is probative evidence identifying both the instalment period in which income was earned, and the instalment period in which income was received, the income must be taken into account in the fortnight in which it was first earned, derived or received. If the evidence establishes that the income was earned in one instalment period and received in a later one, then point 1068-G7A requires the income to be taken into account in the instalment period in which it was earned. This is because the instalment period in which the income was first earned is earlier than the instalment period in which it was first received.

58. This view acknowledges the fact that point 1068-G7A does not confer a discretion to choose when income is taken into account. However, the immediate issue is that a ‘new construction’ of point 1068-G7A is introduced. According to this construction, point 1068-G7A essentially means that income is taken into account in the fortnight earned, derived or received, whichever comes first. This construction is said to be contingent on, and restricted to, there being probative evidence regarding the benefit fortnights when the income was both earned and received, despite the fact point 1068-G7A makes no reference to evidence.

59. The problem here is that the meaning of ‘first earned, derived or received’ somehow shifts with the evidence available. Where there is probative evidence of both the fortnight earned and the fortnight received, the meaning is as outlined in the previous paragraph. However, where there is only probative evidence about receipt, the meaning is first earned, first derived or first received. As outlined earlier, the two meanings are logically inconsistent. Thus, if the meaning in the previous paragraph was to apply to a case where there was only probative evidence of receipt, that income amount could not be applied to the fortnight of receipt if it was later than the fortnight earned.

60. In FTXB the Tribunal rejected the Department’s receipt view. Consistent with the analysis just outlined, the Tribunal observed at paragraph 178 that “[the Applicant’s] construction departs from the text of point H23 by giving work to do to the word ‘first’ only in some cases, depending upon the state of the evidence”. It is probably more accurate to say that the word ‘first’ is given a different role or function depending on the evidence.

61. Ultimately, I think the receipt view involves a confusion between the construction of a provision and the evidence required to make findings of fact relevant to the operation of the provision (already construed). In my view, as point 1068-G7A makes no reference to evidence, any attempt to introduce a construction of this provision that is evidence-dependent involves a fundamental error of construction.

(3)(c) Conclusions on the construction of point 1068-G7A

62. In giving plain effect to the words in point 1068-G7A, the orthodox analysis easily accommodates what the receipt view cannot. That is, when income is taken into account flows logically from the structure and wording of the provision and does not involve an extraneous reference to evidence (bearing no semantic connection to those words). Consistent with Inguanti, earned income is taken into account “once and for all” when it is earned and there is no option or discretion to take income into account when received if it is earned.

63. My view is that the orthodox analysis of the construction of point 1068-G7A is correct. Accordingly, it would be unlawful in my view to apply earned income to the fortnight of receipt in the manner envisaged by the receipt view. This view is unlawful because it is inconsistent with the orthodox view and involves an analysis that has no semantic connection with the words in point 1086-G7A.

64. As noted, the orthodox view is logically inconsistent with the view in FTXB. However, there should be little or no practical difference in adopting one position over the other as, almost invariably (and as occurs in the present matter), an employee will receive their wage or salary after it is earned.

(4) The meaning of ‘earned’

65. A central feature of FTXB is a departure from what has been the received view of the meaning and application of ‘earned’ in the social security context. The received position is noted in Peter Sutherland’s commentary on social security law evidently without a perceived need for further elaboration:[7]

There have been many cases decided on these words [‘earned’, ‘derived’ and ‘received’]. In summary, the following approach has generally been taken:
· Income is earned when the income-producing activity by the person has been completed (ie the work or task required has been undertaken) …
[7] Social Security and Family Assistance Law 4^th ed p 99.

66. The contrary position in FTXB is explained in the following passages:

135. In the context of a statute that deals with legal entitlements to social security benefits and adjustments to those benefits on account of other sources of income, a corollary of our opinion that a person earns income when that person becomes entitled to the income is that ‘entitlement’ must mean legal entitlement. Ordinarily, a person cannot be said to be entitled to a benefit – and thus earned that benefit – unless they have a legally enforceable right to it.
136. It follows from the above analysis that, in our opinion, the time at which a person earns ordinary income for the purposes of point H23 is when that person becomes legally entitled to the income. That time may not necessarily coincide with the time at which the income is payable. That is because a person may become legally entitled to income on day one (and thus earns the income on that day), with that income to be paid on a future day. For example, a company may declare a dividend on shares held by a person on day one, with the payment date being day 14.
137. Neither party embraced the meaning of ‘earned’ set out at [‎136] above. However, the parties’ submissions were not entirely inconsistent with that meaning because they acknowledged that the verb ‘earned’ can be understood as meaning ‘an amount a person is entitled to get for their income producing activities’.
138. Our conclusion that income is ‘earned’ for the purposes of point H23 when a person becomes legally entitled to it means that ‘earned’ cannot be equated with ‘accrued’. A benefit may be accruing on a daily basis without giving rise to a legal entitlement to be paid that benefit at the end of each day. For example, if a worker is entitled to be paid wages for each day of a working week at the end of Friday, the worker may be accruing a right to be paid for each day worked at the end of each work day but the entitlement to be paid does not arise until the end of Friday.
139. In the context of employment income, the time at which an employee becomes legally entitled to wages will depend upon the legal arrangements that apply to the employment relationship. Those legal arrangements may arise from a contract of employment (whether oral or in writing, express or implied or inferred from a course of conduct) or may be governed by a legal instrument such as a statute or an industrial award.

67. The Tribunal indicated that, in the absence of an employment contract, the date a legally enforceable right to be paid wages arises may be inferred from other documents, including pay advices or bank statements, or from oral evidence about a workplace’s practices regarding rostering, timesheets and pay cycles (paragraph 157). Several illustrations were provided.

68. At paragraph 158 there is the example of ‘John Brown’, who works casually from Monday to Sunday and is paid for this week on the following Thursday. In the absence of other evidence, the Tribunal indicated it may be inferred that, although John accrues days in a week for which he will be paid, he does not have a legal entitlement to his wages until each Sunday. It is said that this is when John earns his wage each week.

69. There is also the example of ‘Joyce Barry’ who does on-call work for an employer and is paid at the end of each day. The inference here in the absence of other evidence is that Joyce is legally entitled to be paid on each day she works.

70. The Tribunal does not discuss an instance where a person doing on-call work is paid at a later date. For example, as often seems to happen with on-call public school teaching, payment is made several weeks after the work is performed. In the absence of an available work contract, I presume the Tribunal’s view would be that, understood as on-call work, there was a legal entitlement to the daily wage(s) on each day worked.[8]

[8] In my experience on-call work can usually be inferred from a teacher’s pay advices (as well as their oral evidence) as the individual days worked are itemised.

71. Although likely to be uncommon, there is the further example of ‘James White’, who works full time from Monday to Friday but is paid every second Friday for one week in arrears and one week in advance. Here, although no work has been performed for the week to come, James earns his anticipated wage for that week on the previous pay Friday (because that is when his legal entitlement to those wages arises).

72. The Tribunal’s reasoning to the conclusion that employment income is earned when there is a legally enforceable right to it is relatively brief and is essentially found in paragraphs 132 to 135. In dot point form the reasons are:

-the Oxford English Dictionary defines ‘earn’ to include “to receive or be entitled to (money, a livelihood, or some other material advantage) through work or another activity”;
-as a contextual matter, the social security law generally deals with entitlements and in particular there is a reference in point 1067G-H23 to points 1067G-H23A and 1067G-H23B, both of which contain the phrase ‘becomes entitled to receive that amount’;
-also as a contextual matter, subsection 1073(1) contains this phrase and point 1067G-H25 (in the income test in Module H) contains the term ‘entitlement’;
-regarding extrinsic material, the explanatory memorandum to the Student Assistance (Youth Training Allowance) Amendment Bill 1994, which relevantly included a provision with identical wording to point 1067G-H23, included the statement that “[the provision] provides that, in general, ordinary income is income-tested in the fortnight when the person becomes entitled to it, regardless of when he or she receives it …”.

73. As indicated above, the Tribunal then concluded at paragraph 135 that, in the context of social security legislation dealing with entitlement, an entitlement must be understood as a legally enforceable entitlement. This understanding dovetails well with the received view that a person derives income when they have a legally enforceable right to that income.

74. No doubt much ink could be spilled over the correctness of the Tribunal’s view, particularly where the reasoning is brief and the departure from orthodoxy is radical. What I think is clear (and the Tribunal does not purport otherwise) is that employment contracts ordinarily do not expressly address the question of when money is earned. Employment contracts are about work entitlements and conditions. As the Fair Work Ombudsman indicates in relation to an entitlement to be paid:

Employees must be paid at least monthly and can be paid by one, or a combination of, the following:
-cash
-cheque, money order or postal order, payable to the employee
-electronic funds transfer (for example, EFT or bank transfer).
Most awards, enterprise agreements or registered agreements will set out when employees must be paid (weekly, fortnightly or monthly). If it doesn't, employees must be paid at least monthly.
Employees need to be paid money for their work - they cannot be 'paid in-kind' (for example, with goods such as food).

75. As I understand the Tribunal, the view is that, for social security purposes, a contractual arrangement that a person with regular employment is to be paid upon the conclusion of each regular pay period will ordinarily carry the inference that the person earned their wage at the close of each pay period. The person accrues a right to be paid on each day worked in a regular pay period but does not earn anything on those days because payment of the wages accrued is not legally enforceable until the end of the period.

76. As such and as the Tribunal indicates, there will usually be no need to obtain a person’s work contract and little lost if a contract is not obtainable (and probably little gained in most instances if the contract is available). As in the case of ‘John Brown’ above, it would be a simple inference based on the regular work period involved (as evidenced in pay advices) when John became legally entitled to the wages accrued.

77. There is potential difficulty with those not infrequent cases where Centrelink has relied entirely on bank statements in the absence of other available evidence. As persons can typically have their wages deposited anywhere up to four (or sometimes more) days after a pay period ends, the pay period involved may be unascertainable. The Tribunal does provide the example of ‘Jerry Summers’ in recognition of this scenario although the example does not grapple with the pay period issue because it is known that Jerry worked Monday to Friday.

78. As I understand the Tribunal, it would be unmoved by an argument to the effect that we ordinarily take it that a person earns their wage as and when they perform the required work. Ordinarily, the idea that a person accrues a wage during a work period but is yet to earn that wage looks peculiar, as does the idea that a person (like ‘James White’) can earn money before they have undertaken the work. This ordinary understanding, which the Tribunal recognises is also included in the Oxford English Dictionary,[9] would be rejected on the footing that the social security law requires a more formal understanding.

[9] The dictionary provides as a second meaning ‘to do work or render service in return for (wages)’.

79. Accordingly, I think the Tribunal’s position relies heavily on the idea that the social security law, or particular provisions of the social security law, provide a context for concluding that legal entitlement is the defining concept. For my part, I find the Tribunal’s ‘contextual argument’ less than compelling. For instance, point 1067G-H23A deals with how a very specific instance involving remunerative work that is not employment income (as defined in the Act) is to be treated. It is therefore equally arguable that a reference to entitlement is required as part of this specific treatment and is not required in point 1067G-H23 because an ordinary understanding of when employment income is earned is apposite.

80. Although minds may differ, FTXB was decided by and carries the weight of a presiding member who is a judge of the Federal Court and the AAT President. Although this of course does not mean the outcome is correct, the outcome provides a clear blueprint for deciding cases such as the present matter in circumstances where there is no authority directly on point. In the interests of consistency, the absence of authority to the contrary and noting the Tribunal’s observations that the view is not inconsistent with the social security law in general (and arguably dovetails with certain provisions as well as the received analysis of ‘derived’), it should in my view be followed.

81. The decision also avoids the controversy over the lawfulness of the apportionment methodology. The Tribunal’s view carries the implication that apportionment is incorrect because it assumes the ordinary understanding that employment income is earned as and when the work is undertaken.

(5) The overpayment calculations

82. Centrelink records show that, for the entire period covered by the debts, Miss Hilman was required to lodge fortnightly newstart allowance forms as a condition of continuing payment. This is save for a period from 4 October 2011 to 5 May 2012 when Miss Hilman was not in receipt of a social security payment.

83. As noted, Miss Hilman was found guilty on [number] counts between 21 May 2012 and 23 January 2017 under the Criminal Code Act. Miss Hilman does not contest that she understated her earnings on the forms on many occasions. In written submissions, Miss Hilman begins:

I am writing this not to excuse my behaviour but to add some insight into why I acted as I did. To begin with I would like to state that I know what I did was wrong and I am more than willing to work hard to pay back any over-payments of centre-link that I received and take my punishment on the chin.

(5)(a) Debt 1

84. Centrelink has used its ADEX calculator to calculate the overpayment. ADEX calculations are generally notoriously opaque to inspection except by the most experienced of officers and the calculations themselves (as in the present case) are usually a morass of unexplained figures.

85. According to the authorised review officer, the overpayment was due to Miss Hilman’s understatements of her earnings from [Employer 1] and [Employer 2]. On my understanding, ADEX calculations work directly off information coded on a person’s computer record, including coded earnings (typically found on the EAN screen).

86. According to the earnings coded (as presented in the hearing papers), Miss Hilman also declared earnings from: (1) [Employer 3] for the newstart allowance fortnights ending 3 September 2013 ($1,098.28) and 17 September 2013 ($288); (2) [Employer 4] for the fortnight ending 7 August 2012 ($624.40); (3) [Employer 5] for the fortnight ending 5 September 2011 ($453.51); and (4) [Mr A] for the fortnights ending 4 March 2014 to 10 April 2018.

87. At the hearing, Miss Hilman said [Mr A] worked for both [Employer 3] and [Employer 5], not her. Further, Miss Hilman indicated she was not partnered with [Mr A] until August 2017 and she has never been his employee. Miss Hilman said both she and [Mr A] worked for [Employer 4].

88. I accept Miss Hilman’s evidence. If it is the case that earnings from [Employer 3], [Employer 5] and [Mr A] have been included in the overpayment calculations, this income will need to be excluded in the recalculation of the overpayment as detailed below.

89. The earnings coded also include 15 entries of $45.82 covering each of the benefit fortnights ending 25 July 2011 to 26 June 2012. There is nothing I can locate in the hearing papers to suggest Miss Hilman actually earned this figure in each of these fortnights, which suggests some form of unlawful averaging is probably involved. If this has occurred, these entries must also be excluded from any overpayment calculations.

90. The pay information from [Employer 1] takes the form of [Pay System 1] pay reports. The reports indicate Miss Hilman was paid weekly on a specified pay date. In accordance with the reasoning in FTXB, this invites the inference that Miss Hilman had a legal entitlement to be paid accrued weekly wages on the specified pay dates and therefore earned those wages on those pay dates.

91. [Employer 2] has provided a Payroll Advice summary showing a pay frequency of “twice a month” and the relevant pay dates. Accordingly, it can be inferred Miss Hilman earned her wages on those pay dates.

92. It is evident from amendments to the original [specified] figures (as declared by Miss Hilman) that Debt 1 has been calculated using the apportionment methodology. Accordingly, it will need to be recalculated in accordance with FTXB taking into consideration any additional adjustments required as outlined in paragraphs 86 to 89. The overpayment, as recalculated, is a debt under section 1223.

(5)(b) Debt 2

93. As noted, Debt 2 involves a recalculation using the Department’s ‘receipt view’. The debt has fortunately been recalculated using Centrelink’s more transparent MultiCal calculator. An examination of calculations indicates that earnings from [Mr A] have not been (wrongly) included and that only earnings from [Employer 1] are involved.

94. Although the ‘receipt view’ has been adopted, the assumption in the calculations is that the pay dates shown on the [Pay System 1] pay reports for [Employer 1] coincide with the dates Miss Hilman received the relevant payments. Accordingly, the calculations conform with FTXB and in my view deliver the correct overpayment total.

On this footing, I am satisfied Miss Hilman was overpaid newstart allowance of $17,233.08 from 30 June 2015 to 14 January 2017. The overpayment is also a debt under section 1223.

(5)(c) Debt 3

96. As noted, the officer who raised Debt 3 states the calculations address a payment by [Employer 2] of $928.67 into Miss Hilman’s bank account on 26 June 2013. The payment is said to be assessed as income over a period of 52 weeks from the date of receipt, although no statutory basis for this approach is indicated. The authorised review officer’s decision sheds no further light.

97. Also as noted, an employer report from [Employer 2] of 5 February 2017 indicates the payment was made in error well after Miss Hilman’s contract was finished and could not be recovered. Thus, although the payment is one to which Miss Hilman had no entitlement and is a debt to [Employer 2], it appears recovery attempts have been abandoned.

98. As Miss Hilman indicated at the hearing that the amount has not been repaid and there is no prospect of repayment, I am satisfied it has been used for her benefit and is accordingly ordinary income as defined in section 8. However, it cannot be characterised as employment income as it was an isolated payment made in error and unrelated to any work performed for [Employer 2].

99. As to the treatment of the payment, as far as I am aware there is only one way in which an amount (or lump sum) that is not from remunerative work can be averaged over 52 weeks, namely under section 1073.[10] However, section 1073 can apply only where a recipient is entitled to receive the relevant amount. In the present case, Miss Hilman was never entitled to the amount paid.

[10] A further provision, point 1068‑G7B, allowed for averaging over a period of 12 months but only in relation to remunerative work.

In my view, the amount must therefore be taken into account in the newstart allowance fortnight in which it was received. According to Centrelink records, this would be the instalment fortnight ending 1 July 2013.
Due to the radically different treatment of the amount paid and (to my mind at least) difficulties associated with the authorised review officer’s view that [Employer 1] earnings are also involved, my view is that Debt 3 should be revoked and the amount paid should be included in the recalculation of Debt 1.

(6) Do Debts 1 and 2 attract a recovery fee?

Under section 1228B, a 10% recovery fee is to be added to a newstart allowance debt if the debt arose wholly or partly because the person had either failed to provide information relating to their income from personal exertion, or knowingly or recklessly provided false or misleading information relating to that income.
As noted, Miss Hilman was required to correctly declare her earnings on fortnightly forms lodged throughout the periods comprising Debts 1 and 2. Also as noted, Miss Hilman was convicted by the [Court 1] under subsection 135.2(1) of the Criminal Code Act on [number] counts of the offence of obtaining a financial advantage from the Commonwealth with the knowledge or belief that she was not eligible for that financial advantage. The offences were committed between 21 May 2012 and 23 January 2017. Although not stated, the offences plainly relate to Miss Hilman’s regular understatements of earnings on her fortnightly forms.
This Tribunal is essentially bound by the rulings of a court. As the [Court 1’s] ruling is plainly predicated on its satisfaction that Miss Hilman committed offences during the periods covered by Debts 1 and 2, this Tribunal is not able to make findings inconsistent with this outcome. In any event, Miss Hilman does not contest that she knew she was declaring her earnings incorrectly on the regular occasions that she did so.
Accordingly, a 10% recovery fee must be added to Debt 1 (as recalculated) and to Debt 2. The recovery fee for Debt 1 will obviously be determined once the debt is recalculated. The recovery fee for Debt 2 is $1,723.30, bringing this debt total to $18,956.38.

(7) Interest charges relating to Debts 1, 2 and 3

As noted, Centrelink has also imposed interest charges for each of Debts 1 to 3. The interest charge for Debt 3 will obviously need to be removed.
Centrelink has not reviewed the interest charges relating to Debt 1, which removes this Tribunal’s jurisdiction to review the charges. However, as it appears the interest charges for Debt 2 relate to the same interest periods as those for Debt 1, the same considerations should apply.
Interest charges are debts to the Commonwealth under section 1229C. The authority to impose an interest charge on an unpaid social security debt and the formal requirements to be met in doing so reside in sections 1229A to 1229F.
Paragraph 1229A(1)(a) first requires that a notice is given to a person under subsection 1229(1) regarding the debt. The notice must include the following details:

(a) the date it was issued;
(b) the reason for, and a brief explanation of, the debt;
(c) the period of the debt;
(d) the outstanding balance at the date of the notice;
(e) when the outstanding amount is due and payable;
(ea)the effect of sections 1229A and 1229B;
(f) the options available for repayment of the debt; and
(g) contact details for inquiries about the debt.

Paragraph 1229(1)(ea) requires that the notice specify the effect of section 1229A (where no repayment arrangement is in place), namely that an interest charge by way of a penalty will apply in the event the debt remains unpaid after a due date.
Section 1229E provides that a person in receipt of a social security payment is exempt from interest charges. Under section 1229F a person may be exempt from an interest charge for a period if they have a reasonable excuse for not entering into a repayment arrangement.
According to Centrelink records, Miss Hilman was not in receipt of a social security payment between 18 March 2017 and 7 February 2019.
Regarding Debt 2, the authorised review officer reviewed interest charges totalling $809.84 said to be applied from 26 July 2018 to 15 January 2019. The authorised review officer removed the charges relating to the period 19 October 2018 to 15 January 2019 on the basis that Miss Hilman was in prison during this period. This is an obviously appropriate exemption under section 1229F.
According to Centrelink records, the interest charges for the remaining period from 26 July to 18 October 2018 (for the debt as amended) total $386.71. As to this period, Centrelink is evidently relying on its debt notice of 26 June 2018 to satisfy the notification requirements in subsection 1229(1). The notice satisfies the formal requirements outlined, although it does of course refer to the debt figure previously calculated using apportionment and the balance said to be outstanding relates to that figure.
This does raise the question of whether a correction to, or generally a recalculation of, a debt retrospectively renders a notice referring to the previous figure and balance outstanding defective. I take it from Centrelink’s approach that its view is that the notice remains effective and interest charges are recalculated as though it contained the correct figures.
It seems to me this approach is correct, as the specific requirement is to quote not the debt figure but the amount outstanding at the time of issue. Where an adjustment to, or correction of, a debt is involved, it arguably does not alter the balance that was outstanding at the time of issue (under a valid determination). Instead, the change involves a retrospective adjustment to the outstanding balance at the time.
Miss Hilman indicated she did not receive the notice. The notice was sent to [Address 1], South Australia in circumstances where Miss Hilman said she moved to Queensland in January 2018 and had her mail redirected for three months. A Centrelink file note of 30 April 2018 indicates Miss Hilman provided a new residential address but indicated her postal address “is still valid”. As there is no suggestion the notice would have been delivered to the stated postal address, as it is the postal address last notified to Centrelink it is taken to have been given to Miss Hilman.[11]
[11] Under sections 28A and 29 of the Acts Interpretation Act 1901.
The file note also indicates that Miss Hilman called because Centrelink had informed her it had referred her debts to the Director of Public Prosecutions for (possible) prosecution action. It is safe to infer that Centrelink’s notice of 26 June 2018 issued in circumstances where Centrelink had instigated prosecution action and Miss Hilman was aware of this.
In my view Miss Hilman has a reasonable excuse for not entering into a repayment arrangement. Firstly, Miss Hilman was in fact unaware of Centrelink’s notice of 26 June 2018 and unaware of the specific requirement to commence repayments. Secondly, even had Miss Hilman received the notice, it was sent in circumstances where Centrelink was taking prosecution action, which might ordinarily invite the conclusion that the prosecution action overtook any immediate need to make repayments.
Taking account of Miss Hilman’s subsequent imprisonment (as detailed earlier), I consider she was exempt from interest charges from 26 July 2018 to 15 January 2019.

(8) Waiver

Section 1237A provides for the waiver of the Commonwealth’s right to recover a debt where: (1) the debt was caused solely by a Commonwealth administrative error; and (2) the debtor received the payments making up the debt in good faith.
As noted, Debt 1 (as recalculated) and Debt 2 are due to Miss Hilman’s regular understatements of earnings on fortnightly newstart allowance payment forms. As administrative error is not involved, the debts cannot be waived under section 1237A.
Debts may also be waived in whole or part under section 1237AAD, which applies where there are special circumstances (other than financial hardship alone):
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, the Administration 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.
Miss Hilman’s position is that her circumstances are special in the terms of this provision. However, before special circumstances can be considered, a person must satisfy paragraph 1237AAD(a)

Regarding paragraph 1237AAD(a), if any part of a debt is the result of a false statement or representation knowingly made, the entire debt cannot be considered for waiver under section 1237AAD. In Re Callaghan and Secretary, Department of Social Security [1996] AATA 413, Deputy President Forgie said:
48. There is nothing in section 1237AAD which suggests that the word "knowingly" should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that she or she is making a false statement or representation or that she or she is failing or omitting to comply with a provision of the Act.
I agree with this statement, which has been adopted in numerous subsequent decisions of the AAT. Thus, if a person knows the information being provided is wrong, paragraph 1237AAD(a) will not be satisfied even where, for example, there was no intent to deceive.
As established above, the barrier to a consideration of special circumstances is that Miss Hilman knew she was completing fortnightly payment forms incorrectly and that both debts result from the understatements made. Accordingly, neither Debt 1 (as recalculated) nor Debt 2 can be waived under section 1237AAD.
The remaining waiver provisions are not relevant from which it follows that the debts are recoverable.

DECISION

The Tribunal sets aside the decision under review relating to Debt 3 (as designated in the Reasons) and substitutes the decision that there is no debt (which also removes an associated interest charge debt).

Date of hearing: 5 December 2024

Key Legal Topics

Areas of Law

Administrative Law
Social Security Law

Legal Concepts

Jurisdiction
Standing
Specific Performance
Administrative Error
Statutory Interpretation
Recalculation of Debt
Interest Charges

[2024] ARTA 547

11 December 2024

Key Legal Topics

Areas of Law

Administrative Law

Social Security Law

Legal Concepts

Jurisdiction

Standing

Specific Performance

Administrative Error

Statutory Interpretation

Recalculation of Debt

Interest Charges