Holmes and Secretary, Department of Family and Community Services
[2003] AATA 888
•11 September 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 888
ADMINISTRATIVE APPEALS TRIBUNAL )
)No W2002/451
GENERAL ADMINISTRATIVE DIVISION ) Re JILLIAN HOLMES Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr M Allen, Member Date11 September 2003
PlacePerth
Decision The decision under review is affirmed. ..............(Sgd. M Allen)............................
Member
CATCHWORDS
Social Security – Family Tax Benefit – calculation of adjusted taxable income – where allowable deductions, including net rental property loss, exceeds assessable income – whether taxable income can be negative amount – whether debt due to Commonwealth – whether debt should be waived – whether special circumstances exist
Administrative Appeals Tribunal Act 1975 s37
A New Tax System (Family Assistance) Act 1999 s58, schedule 1, schedule 3
A New Tax System (Family Assistance) (Administration) Act 1999 ss71, 95, 96, 101
Income Tax Assessment Act 1997 ss4-10, 4-15
Re S, DSS and Durkin AAT 6376, 12 November 1990, (1990) 59 SSR 804
S, DSS v Hales (1998) 51 ALD 659
S, DFCS v Chamberlain [2002] FCA 67
REASONS FOR DECISION
11 September 2003 Mr M Allen, Member 1. This is an application by Mrs Holmes for review of a decision of the Social Security Appeals Tribunal (“SSAT”) made on 22 October 2002. On that day the SSAT affirmed two decisions made by delegates of the Secretary as follows:
(a)on 16 September 2002, to raise and recover a debt of Family Allowance of $936.00 in respect of the period from 1 January 2000 to 30 June 2000;
(b)on 27 July 2002, to raise and recover a debt of Family Tax Benefit of $3,377.62 in respect of the period from 1July 2001 to 30 June 2002.
2. At the hearing Mrs Holmes was represented by her husband, Mr Mark Holmes, and was also assisted by her accountant, Mr Lachlan Mills, who participated in the hearing by telephone. The Secretary was represented by Mr Ward, who was assisted by Ms Hackney, both of whom are Centrelink officers. The documents filed by the respondent pursuant to section 37 of the Administrative Appeals Tribunal Act1975 were received into evidence. No formal oral evidence was given at the hearing but Mr and Mrs Holmes informed the Tribunal of various aspects of the matter, none of which was in dispute.
3. The papers relating to the decision made by the Secretary on 16 September 2002 regarding the debt in respect of the period of 1 January to 30 June 2000 are contained on the Tribunal’s file W2002/ 448. At the hearing Mrs Holmes advised that she did not wish to proceed with the application to review that decision and the application has since been withdrawn.
4. The papers in relation to the decision made by the Secretary on 27 July 2002 are contained on the Tribunal file W2002/ 451 and these reasons for decision relate only to that matter.
Background
5. None of the evidence was disputed and from the documentation available to me and the information provided at the hearing I make the following findings of fact.
6. For the 13 years up to the end of 2001 Mr and Mrs Holmes and their three children lived outside the Perth metropolitan area as required by Mr Holmes’ employment with a bank. They maintained a residence in Perth that was rented out for that period.
7. At all relevant times Mrs Holmes was eligible to receive “family” assistance under the various names by which that assistance has been provided by the Government ie Family Allowance, Family Payment, Family Tax Payment and Family Tax Benefit (“FTB”).
8. Prior to 1 July 2001 Mrs Holmes provided estimates to Centrelink of the expected incomes of herself and her husband in the financial year to end on 30 June 2002. The estimates were that she and her husband would have income of $1,200.00 and $77,400 respectively and that they each anticipated a net rental property loss of $1,600.
9. In late 2001 the bank that employed Mr Holmes transferred him back to the metropolitan area at short notice and in January 2002 he received a lump sum payment from the bank as an allowance for the move. Accordingly, on 29 January 2001 Mrs Holmes provided Centrelink with a revised estimate of the income that she and her husband expected for the year ended 30 June 2002. The new estimates were $1,200.00 income for Mrs Holmes, $94,720.00 for Mr Holmes (including $600.00 by way of fringe benefits) and the estimate for net rental property loss continued to be $1,600.00 for each of them. As a consequence Centrelink cancelled the FTB Part A because the income limit was now exceeded but continued to pay FTB Part B at a reduced rate to Mrs Holmes based on these new estimates from 29 January to 30 June 2002.
10. During the first half of 2002 Mr and Mrs Holmes spent a considerable amount of money renovating their Perth home, which had been left in poor condition as a result of its rental for many years, and much of the amount spent was able to be claimed as deductions against gross rental income received on the property.
11. For the year ended 30 June 2002 Mrs Holmes submitted a tax return to the Commissioner for Taxation which disclosed the following assessable income and deductions:
Salary & Wages $1,598.00 Interest Received $369.00 Gross Rental Income
$7,772.00
Total Income $9,739.00
Less
Car Expenses $132.00 Other work expenses $265.00 Tax Agents Fee $50.00 Rental Deductions
$27,732.00
Net Loss
$18,440.00
12. On the basis of that return the Commissioner for Taxation issued a notice to Mrs Holmes in July 2002, which stated that “no tax is payable on your taxable income of $0 shown on your return ....”(T12).
13. For the same financial year Mr Holmes had a taxable income of $79,344.00 after taking into account a net rental property loss (“NRPL”) of $19,961.00. Mrs Holmes’ NRPL for that year was $19,960.00 ie gross rental income of $7,772.00 minus rental deductions of $27,732.00.
14. On 27 July 2002 Centrelink officers, acting in accordance with Guideline 3.2.5 of the Family Assistance Guide, decided that the NRPL of Mr and Mrs Holmes as set out in the previous paragraph had to be treated as income for FTB purposes. In the case of Mrs Holmes, her taxable income was to be regarded as zero to which had to be added the NRPL of $19,960.00, giving an “adjusted taxable income” (“ATI”) for the year of $19,960.00. In the case of Mr Holmes, the NRPL of $19,961.00 was added to his taxable income of $79,344.00 resulting in an ATI of $99,305.00.
15. On the basis of the above, the officer determined that Mrs Holmes had been overpaid FTB during the year ended 30 June 2002 in an amount $3,377.62. That decision was affirmed on internal review and also affirmed by the SSAT.
The Issues
16. The first issue to be determined in this case is whether Mrs Holmes was overpaid FTB, resulting in the creation of a debt due by her to the Commonwealth. If such a debt does arise then a second issue arises, namely, whether it should be recovered by the Commonwealth.
Consideration
17. It is not in dispute that at all relevant times Mrs Holmes was eligible to receive FTB. What is in issue is how the NRPL that she incurred should have been treated for the purpose of calculating her ATI – which affected the rate at which she would have been entitled to receive FTB.
18. The payment of FTB is governed by the provisions of the A New Tax System (Family Assistance) Act 1999 (“the Assistance Act”). Section 58 of the Assistance Act provides that a person’s annual rate of FTB “is to be calculated in accordance with the rate calculator in schedule 1.” It is sufficient to note that schedule 1 deals with, amongst other things, the method of calculating both FTB Part A and Part B (in clauses 25 and 29 respectively). Both those clauses require the assessment of a person’s (and the person’s partner’s) ATI. Schedule 3 of the Assistance Act deals with how an ATI is to be calculated. Clauses 2(1) and 6 of schedule 3 are as follows:
“Adjusted taxable income
2(1)For the purposes of this Act and subject to subclause (2), an individual’s [ATI] for a particular income year is the sum of the following amounts (income components):
(a)the individual’s taxable income for that year;
(b)the individual’s adjusted fringe benefits total for that year;
(c)the individual’s target foreign income for that year;
(d)the individual’s [NRPL] for that year; and
(e)the individual’s tax free pension or benefit for that year;
less the amount of the individual’s deductible child maintenance expenditure for that year”.
6 The net rental property loss of an individual for an income year is:
(a)if the expenses incurred by the individual on rental property during that year exceed the individual’s gross rental property income for that year – the amount by which those expenses exceed that gross rental property income; or
(b)if the expenses incurred by the individual on rental property during that year do not exceed the individual’s gross rental property income for that year – nil.
19. One other definition from the Assistance Act should be noted. Section 3(1) provides that “taxable income has the same meaning as in the Income Tax Assessment Act” and that the “Income Tax Assessment Act” means the Income Tax Assessment Act 1997 (“ITAA 1997”).
20. The concept of taxable income is dealt with in Part 1-3, division 4 of ITAA 1997. That part is entitled “Core Provisions” and the division is entitled “How to work out the Income Tax payable on your taxable Income”.. Section 4-10 (2) of ITAA 1997 provides that a person’s income tax is worked out by reference to the person’s taxable income for the income year. Subsection (3) of that section provides that a person’s income tax is worked out by multiplying the taxable income by an applicable income rate and then deducting any tax offsets.
21. Section 4-15 provides as follows:
“4-15 How to work out your taxable income
(1)work out your taxable income for the income year like this:
Taxable Income = Assessable income – Deductions
Method statement
Step 1. Add up all your assessable income for the income year.
To find out about your assessable income, see Division 6
Step 2. Add up all your deductions for the income year.
To find out about you can deduct, see Division 8
Step 3 Subtract your deductions from your assessable income (unless they exceed it). The result is your taxable income. (If the deductions equal or exceed the assessable income, you don’t have a taxable income.)Note: If the deductions exceed the assessable income, you may have a tax loss which you may be able to deduct in a later income year: see Division 36.”
22. That treatment of the concept of taxable income can be compared with the general definition of taxable income contained in the Income Tax Assessment Act 1936 (“ITAA36”), which was applicable to income tax assessments for years prior to 1997/98, namely, that taxable income meant “the amount remaining after deducting from the assessable income all allowable deductions.”
23. Chapter 3.2 of Centrelink’s Family Assistance Guide (“the Guide”) is intended to provide guidance to Centrelink officers in their administration of this part of the Assistance Act. Relevant extracts from that chapter are as follows:
“3.2.1 Adjusted Taxable Income – General Provisions
...
An individual’s [ATI] is the sum of their taxable income, PLUS certain non-taxable types of income, LESS their deductible child maintenance expenditure ...
...
For the purposes of FTB Part A ..., if a claimant is a member of a couple, their [ATI] for a tax year includes their partner’s ATI for that year.
For the purposes of FTB Part B, if the claimant is a member of a couple, the ATI of the lowest earner is used to calculate the rate of FTB Part B.
....
3.2.2 Taxable Income
...
Taxable income has the same meaning as in the Income Tax Assessment Act. It is the amount of assessable income received LESS any allowable deductions.
Income assessed by the ATO
The ATO assesses taxable income and advises taxpayers of the amount each year on a notice of assessment. This amount is used to assess taxable income for FTB ... purposes.
Income NOT assessed by the ATO
If a customer or their partner (1.1.P.30) has not had their income assessed by the ATO, they may provide an estimate of their taxable income, depending on the type of claim they are making. Even when the income is below the tax threshold, it is classed as taxable income and assessed for FTB and CCB purposes. A loss is treated as zero taxable income.
3.2.5. Net Rental Property Loss
...
Assessing net rental property loss – general
The taxation legislation allows a net rental property loss as a deduction from assessable income in deriving a person’s taxable income ... . For ATI purposes, a net rental property loss is added back to the person’s taxable income as part of their ATI.
Net rental property loss not assessable – partnerships and trusts
A net rental property loss declared as a loss by a partnership or trust is NOT to be added back in the assessment of income for ATI even where it is declared to the ATO on a person’s income tax return as a partnership or trust distribution loss.
Assessing net rental property loss – negative income
If a person’s taxable income is calculated to be a negative value, it is taken to be zero, before adding the net rental property losses and other income components.
Explanation: This is because taxation legislation provides for taxable income losses to be carried forward to the next tax year. If the person does not receive the benefit of the loss in one year, it is carried forward to reduce their taxable income for the next year.
Example: A person provides the following estimate of their income
Income Details
Estimate
Income from wages
$10,000
Loss from rental property
$15,000
Taxable Income
($5,000)
Taxable income is taken to be zero, then the net rental property loss of $15,000 is added, giving ATI of $15,000.
Assessing net rental property loss – members of a couple
A customer’s and their partner’s income is calculated separately, before being combined.
Example: A customer and their partner provide the following income details:
Income Details
Customer
Partner
Income from wages
$1,000
$33,000
Loss from rental property
$4,000
$4,000
Taxable Income
($3,000)
*Taken to be nil
$29,000
Plus net rental property losses
$4,000
$4,000
ATI
$4,000
$4,000
Their combined ATI is $4,000 + $33,000 = $37,000”
24. It is not in dispute that only items (income components) (a) and (b) of clause 2(1) of schedule 3 of the Assistance Act are relevant in this case and that Mrs Homes’ NRPL for the year was $19,960.00. What is in contention in the case is whether Centrelink was correct in treating Mrs Holmes’ taxable income for the purposes of clause 2(1) as being nil in that year and then adding the $19,960.00 NRPL to result in an ATI of $19,960.00. That approach is consistent with the methodology and examples set out in clause 3.2.2 of the Guide. Is it correct?
25. At least for the purposes of assessing income tax payable, it is clear from s4-15(1) of ITAA 1997 that a person’s taxable income cannot be a negative amount. If the allowable deductions equal or exceed the assessable income then the person will not have a taxable income but may have a tax loss that can be carried forward to a later income year and deducted from the assessable income in that later year – so as to reduce the taxable income in the later year.
26. Where the deductions do not exceed the assessable income – so that there remains a positive amount – then the person will have a taxable income for the year and that positive amount will become the “income component” specified in clause 2(1)(a) of schedule 3 of the Assistance Act to which the other income components are added. That is what happened in relation to Mr Holmes’ income and NRPL and there has been no suggestion that that was not the correct way to deal with his position. However, Mrs Holmes has contended that, in her case, her taxable income should have been the negative amount of $18,440 and that negative amount should have been used as the income component in clause 2(1)(a) of schedule 3 – with her NRPL of $19,960.00 then being used as income component (d) to arrive at an ATI of $1,520.00.
27. Because taxable income for FTB purposes is defined to have the same meaning as in the ITAA 1997 (and, previously, the ITAA36) for income tax purposes, this Tribunal has held (in relation to the equivalent family allowance provisions of the Social SecurityAct 1991 (“the SSA”) which preceded the FTB provisions and the ITAA36) that the assessment of the Commissioner of Taxation of a person’s taxable income is conclusive of that amount – and that a figure of “below zero” (ie a negative amount) “can only be said to be a loss and consequently represents no income or nil income” : Re Secretary, Dept of Social Security and Durkin (1990) 59 SSR 804.
28. The more explicit provisions of the ITAA 1997 in relation to taxable incomes, which reinforce the notion that where deductions exceed income then there is no taxable income (but may be a loss) in my opinion make it even clearer that in that situation there will be no amount to be included as taxable income, or income component (a) in clause 2(1) of schedule 3, for the purpose of calculating a person’s ATI. That is what happened to Mrs Holmes – and, in my opinion, that is the approach that is mandated by schedule 3. Clause 2(1) of that schedule requires the addition of five income components in order to obtain the sum – which (after deducting maintenance expenditure), represents a person’s ATI. In any given case some (or all) of the components may be nil – and so there can be no reason why, in an appropriate case, the taxable income should not be nil. It follows that Mrs Holmes’ ATI was correctly calculated as required by the Assistance Act.
29. Consequently, I find that Mrs Holmes was paid more FTB than she was entitled to – in the amount of $3,377.62. Section 71(1) of the A New Tax System (Family Assistance)(Administration) Act 1999 (“the Administration Act”) provides that if an amount has been paid to a person by way of FTB in respect of a period and the person was not entitled to the amount in respect of that period then the amount so paid is a debt due to the Commonwealth by the person. There is, therefore, a debt of $3,377.62 due by Mrs Holmes to the Commonwealth.
30. The next question is whether that debt should be recovered. French J. in Secretary, Department of Social Security and Hales (1998) 51 ALD 695 at 695,696 commented (in relation to the SSA, but the principles are equally applicable) as follows:
“From time to time in the administration of social security benefits overpayments occur. Sometimes these are the result of innocent non-compliance with the requirements of the law which can be affected by the stress associated with the circumstances that led to the receipt of benefits in the first place. The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth.”
31. Section 96 of the Administration Act grants to the Secretary, and hence this Tribunal, the ability to waive the Commonwealth’s right to recover the whole or part of a debt only in certain circumstances described in certain specified sections of that Act. In the present case the only relevant section is s101 of the Administration Act, which grants a discretionary power to waive a debt in the following terms:
“101 Waiver in special circumstances
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 a false representation;
(ii)failing or omitting to comply with a provision of the family assistance law; 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.”
32. There is no dispute that s101(a) is satisfied. There is no assertion that Mrs Holmes or anyone else has knowingly made a false statement or representation or failed to comply with a requirement of the legislation.
33. As regards the requirement that there be special circumstances (other than financial hardship alone) that make it desirable to waive the debt, Mrs Holmes informed the Tribunal to the following effect:
(a)She and her husband had not anticipated or planned for the return to the city at short notice. Consequently, the need to incur the considerable expenditure on their house (which generated the NRPL) had not been planned. They had borrowed the money to fund the renovations.
(b)She had never, since her marriage, earned much income. In recent years she had earned only a few thousand dollars each year from a part-time cleaning job, which was low enough to always be below the tax-free income threshold.
(c)Although, as a joint owner of the house that had been rented out, she was entitled to claim one-half of the allowable deductions, it had never occurred to her or her husband that the NRPL would be treated in the way it had for FTB purposes. It would have been open to her to not claim as an allowable deduction the NRPL (or claim only a part of it) so that her taxable income remained in a positive number and the NRPL was a much lower figure – resulting in a much lower ATI.
(d)She had no expectation of earning any significant assessable income in future years – bearing in mind that she would no longer have assessable rental income and her cleaning job had come to an end. Accordingly, there was little reason to think she would be able to utilise the tax loss generated in the 2001/2002 taxation year in the foreseeable future.
(e)Her’s is a very ordinary family. The move back to the city was stressful. She and her husband always tried to do the right thing – as evidenced by the contacts made by Mr Holmes and their accountant with Centrelink to inform Centrelink of unanticipated income such as the removal allowance paid to Mr Holmes by his employer in early 2002. They did not have any sort of “high” lifestyle and relied on the FTB to cover various expenses. Her husband’s employment is not necessarily secure.
(f)Although the debt due to the Commonwealth had been reduced by the deduction of instalments from her FTB payments, after July 2003 her children would be of an age where no FTB would be payable. She would need to try to borrow to repay the debt and was not sure she would be able to.
34. Mr Ward contended that none of the factors present in the case could be said to be so special as to justify a waiver of the debt.
35. What should be regarded as special circumstances is an issue that confronts this Tribunal regularly in the context of social security benefits. Reference is frequently made, with approval, to the decision of the Tribunal in Re Beadle and Director General of Social Security (1984) 6 ALD 1 at 3, that one should look for circumstances that are unusual, uncommon or exceptional. They need not be unique but they must have a particular quality of unusualness that permits them to be described as special. In Re Boscolo and Secretary Department of Social Security (1999) 53 ALD 277 at 281 and 282 French. described the core of the requirement as being that there be something unusual or different to take the matter out of the ordinary course, but without requiring that the case be extremely unusual, uncommon or exceptional.
36. The main argument advanced for Mrs Holmes was that the operation of the legislation relating to the calculation of ATI resulted in an unjust or unfair outcome and that this constitutes a special circumstance. The perceived unfairness of application of a legislative provision and whether that can be a special circumstance has been considered by this Tribunal and the Federal Court in relation to s1184K of the SSA and its predecessor provisions in the context of whether compensation payments should be treated as not having been received by reason of the special circumstances of the case. In Secretary, Dept of Family and Community Services v Chamberlain [2002] FCA 67 Keifel J. concluded that the fact that a statute may operate in an arbitrary way and the extent of the difference between the arbitrary operation and the factual basis on which the parties concerned acted would not, of itself, be a special circumstance.
37. Keifel J. also noted that the statutory objectives sought to be achieved by use of the statutory provision in question will also be relevant. My research reveals that the Social Security Amendment Act (No 2) 1994 (“the 1994 Act”) introduced the regime that involved adding to a person’s taxable income (defined to have the same meaning as in income tax legislation) a component for NRPL. Section 53(1) of the 1994 Act amended point 1069-H21 of the SSA and provided that a “person’s income for a particular tax year is the sum of” four components that are in identical terms to the income components (a) to (d) contained in clause 2(1) of schedule 3 of the Assistance act and which are set out in para 18 above. The fourth component – which equates with clause 2(1)(d) and deals with NRPL - was added to the list for the first time.
38. A Supplementary Explanatory Memorandum (“EM”) relating to the NRPL provisions in the Bill that became the 1994 Act contains the following outline of the measures:
“Treatment of negative gearing
From 1 January 1995, the income test for family payment ... will be amended so that certain tax deductible expenses on rental property are included as income. As a result, income testing arrangements for those payments will be more equitable and improve targeting of the payments. Similar amendments are proposed for AUSTUDY.
This measure follows on from the decision in the 1992 Budget to add back to taxable income the value of certain employer provided fringe benefits for the purposes of applying the income tests for those same payments.”
39. The EM also contains the following:
“Currently, the income test for [family payments (“FP”)] ... is based on ‘taxable income’ as defined in the Income Tax Assessment Act 1936 (the Tax Act). If a person has rental property, the Tax Act allows the person to deduct certain expenses from the income gained from the property. Any resulting income losses can be offset against other income of the person with the person paying tax on the net figure – ‘taxable income’. This process is known as ‘negative gearing’.. Since the net taxable income figure is also used in income testing for FP ... , a person also gets the benefit of ‘negative gearing’ for social security purposes.”
40. Although I have been unable to locate any speeches by the responsible Minister of the time that addresses the particular provisions, the intent of the amendment seems clear. A person who gains a taxation advantage by offsetting a rental property loss against other assessable income should not also be able to gain a social security advantage from the same loss, which would be the case if the person’s taxable income alone was used for calculating the amount of benefits payable.
41. There is, therefore, a clear legislative intent to add back any NRPL to taxable income. Parliament must also be presumed to have been aware, and to have intended, that a person whose allowable deductions exceeded assessable income in a particular year will not actually have a taxable income for that year, and that when an NRPL is added back – to a base of zero rather than to a base of a negative number – the resultant ATI will necessarily be greater than would be the case if the negative “tax loss” amount (arrived at by simply deducting the NRPL from other assessable income) was the starting point. The justification for such a result would be the desire to avoid the “double” advantage referred to in the previous paragraph.
42. The consequences of the application of the statutory provision for a person in Mrs Holmes’ position can not, therefore, be said to be unintended. Are they unfair or unjust or otherwise such as to make her case out of the ordinary or exceptional? It may be true that Mrs Holmes could have claimed only enough of the rental loss deductions to offset her total income of $9,739 and reduce her taxable income to nil – rather than claiming the full $27,732 deduction. In that case she would have ended up with an ATI of $9,739 rather than $19,960. I say that it “may be” true because the definition of NRPL set out in clause 2(6) of the schedule 3 of the Assistance Act does not expressly give that flexibility. It is not necessary for me to attempt to resolve that issue. However, had Mrs Holmes done that she would not have had a tax loss to carry forward to future years as she now has. It is speculative to try to predict if Mrs Holmes will in fact derive assessable income in the future against which the tax losses can be offset. If she does she will gain a taxation advantage from the tax losses – although there will, of course, be a timing difference.
43. Taken overall, I do not consider that the impact of the application of the legislation on Mrs Holmes can be said to be a special circumstance for the purposes of s101 of the Administration Act. In addition, I do not consider that any of the other matters set out in para 33 above taken together can be considered as sufficiently special to justify the exercise of the discretion to waive the debt under s101. Accordingly, I decline to exercise that discretion.
44. The final issue to be considered is whether the debt due should be written off (ie its recovery deferred) pursuant to s95 of the Administration Act – which is in the following terms so far as relevant:
“95 Secretary may write off debt
(1)Subject to subsection (2), the Secretary may decide to write off a debt, for a stated period or otherwise.
(2)The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a)the debt is irrecoverable at law; or
(b)the debtor has no capacity to repay the debt; or
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
(3)For the purposes of paragraph (2)(a), a debt is taken to be irrecoverable at law if, and only if:
(a)the debt cannot be recovered by means of:
(i)deductions under section 84; or
(iaa)deductions under section 1231 of the Social Security Act 1991; or
(ia)setting off under section 84A arrears of family assistance; or
(ii) application of an income tax refund under section 87; or
(iia) setting off under section 87A against advances; or
(iii) legal proceedings under section 88; or
(iv) garnishee notice under section 89;
because the relevant time limit for recovery action under that section has elapsed; or
(b)there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c)the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d)the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.
(4)For the purposes of paragraph (2)(b), if a debt is recoverable by means of:
(a)deductions under section 84; or
(aa)deductions under section 1231 of the Social Security Act 1991; or
(b)setting off under section 84A arrears of family assistance; or
(c)application of an income tax refund under section 87; or
(d)setting off under section 87A against advances;
the person is taken to have a capacity to repay the debt unless recovery by those means would cause the person severe financial hardship.
(5)...
(6)... “.
45. On all the material before me I cannot conclude that any of the preconditions for a write off set out in s95(2) could be satisfied. Only s95(2)(b) could possibly be relevant – and even if recovery by one of the means referred to in s95(4) would not be available, on the evidence I consider that Mrs Holmes has the ability to repay the debt over time by instalments, which Mr Ward advised would be acceptable to the Secretary. Accordingly, I do not consider that write off of the debt is appropriate.
46. For the reasons set out above my conclusions are that a debt of $3,377.62 is due by Mrs Holmes to the Commonwealth and that the debt should be recovered. The decision of the SSAT to that effect is affirmed.
I certify that the 46 preceding paragraphs are a true copy of the reasons for the decision herein of Mr M Allen, Member
Signed: ......……..(Sgd. R Morgan).........................
AssociateDate/s of Hearing 2 May 2003
Date of Decision 11 September 2003
Counsel for the Applicant Mr M Holmes & Mr L Mills
Solicitor for the Applicant
Counsel for the Respondent Mr C Ward & Ms K Hackney
Solicitor for the Respondent
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