Hosking and Secretary, Department of Family and Community Services - [2000] AATA 1051

DECISION AND REASONS FOR DECISION [2000] AATA 1051

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S1999/404

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

DECISION

Tribunal Senior Member W.H. Eyre

Date29 November 2000
PlaceAdelaide

Decision      The Tribunal sets aside the decision under review and in substitution decides there is no debt due to the Commonwealth that is recoverable under sub-section 1223(3) of the Social Security Act 1991.
  (Signed)
  W.H. EYRE
  (Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – Family Allowance – applicant did not request estimate of income be used – s.885 inapplicable – whether failure to notify notifiable event – applicant did not fail to notify – s.886 inapplicable – no debt recoverable under s.1223(3)
Social Security Act 1991 ss.885, 886, 1223, 1237A, 1237AAD
Re Secretary, Department of Family and Community Services and Butt [2000] AATA 623
Re Secretary, Department of Family and Community Services and Dyson [2000] AATA 306

REASONS FOR DECISION

29 November 2000 Senior Member W.H. Eyre

Mrs Hosking has applied to this Tribunal for review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 25 August 1999. That decision affirmed a decision made by the respondent's delegate on 8 March 1999 and affirmed by an authorised review officer on 20 April 1999, to raise and recover a debt of $4,200.85. The alleged debt represents overpayment of Family Allowance for the period, family paydays, 6 November 1997 to 8 October 1998. Another overpayment debt of $1081.50 in respect of 21 October 1998 to 31 December 1998 was waived on the basis of administrative error.
The Tribunal has before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents) and the documents tendered by the applicant (Exhibits A1-A3) and by the respondent (Exhibits R1-R3). Mrs Hosking was represented by Mr Chris Roberts, with Ms Armstrong, of the Welfare Rights Centre. The respondent was represented by Ms Odgers.
Mrs Hosking gave sworn evidence to the Tribunal. It is convenient to recount that in brief so far as it is relevant to the issues before the Tribunal.
Mrs Hosking told the Tribunal she had first applied for Family Payment (a term used herein as synonymous with Family Allowance) about the time her third child, now aged 10, was born or maybe before that. In August 1994 Mrs Hosking's husband became self-employed as a fabricator. That business is conducted by the partnership G M & E C Hosking.
Mrs Hosking described that each year in October she would receive an annual review form. She would complete it and return it to the Department/Centrelink and a few weeks later receive a letter advising her of the amount of payment she would receive. On the reverse side of the letter would be noted a figure on which the amount of Family Payment was calculated. In October 1994 she had indicated that Mr Hosking was self-employed.

Mrs Hosking told the Tribunal that the yearly review forms asked for the previous year's actual income and for an estimate of income "if it was going to change from the previous year". Mrs Hosking said she did not know why an estimate was asked for. She said it was "never explained. I could never see the point in estimating". Mrs Hosking's evidence is that she thought Family Payment was always payable on the previous year's taxable income and that if it was "paid high or low" it would "balance out".
Mrs Hosking was clear in her evidence that she had never asked Centrelink to use an estimate to calculate her entitlement to Family Payment. She was unaware that she could have asked for payments to be based on an estimate. In September 1996 the partnership purchased a guillotine. The expense of this purchase had placed a considerable strain on finances and had she been aware that she could ask for payments to be based on an estimate (rather than the previous financial year's actual taxable income) she would have done so then.
Mrs Hosking said she had been "astounded to say the least" to receive a letter from Centrelink in March 1999 stating there had been an overpayment to her of $4,200.85. Mrs Hosking said she thought "the Department had made an awful mistake" and made an appointment to "sort it out" at the Salisbury office. She said she had "expected them to say "sorry … it's a mistake. Rip it up". That has not occurred; hence the present application.
Mrs Hosking impressed the Tribunal as a truthful person. Her oral evidence remained unshaken by cross-examination and is supported by the documents before the Tribunal. In particular the Tribunal finds Mrs Hosking never requested that Family Payment be calculated on an estimate of income; Mrs Hosking completed the yearly review forms honestly and as accurately as she could including by providing estimated income as sought by the forms; Mrs Hosking believed Family Payment was calculated on actual taxable income for the previous financial year; Mrs Hosking was unaware that she could have asked for Family Payment to be calculated on her estimate of income; Mrs Hosking advised Centrelink of her and her husband's actual taxable income for 1997/98 very soon after becoming aware of the figure (T11/64), namely $17,011 for Mr Hosking and $ 17,012 for Mrs Hosking.
the issues
Before there can be a debt, there must be an overpayment. If there is an overpayment it may be a debt payable to the Commonwealth. If there is a debt, consideration must be given to whether it should be waived under sub-section 1237A(1) (for "administrative error") or section 1237AAD (for "special circumstances") of the Social Security Act 1991 ("the Act"). As stated above, the matter before the Tribunal relates to the amount of Family Payment allegedly overpaid from the paydays 6 November 1997 to 8 October 1998, calculated at $4,200.85. No issue is taken with respect to the arithmetical calculation.
The Tribunal notes that the SSAT decision was made on 25 August 1999 before the decisions of this Tribunal in Re Secretary, Department of Family and Community Services and Butt [2000] AATA 623 and Re Secretary, Department of Family and Community Services and Dyson [2000] AATA 306. Before briefly setting out the applicable law it is first appropriate to identify and describe the decision under review in more detail.
the decision under review
It is important to identify the decision made and the basis for it. The overpayment, the subject of these proceedings, arose in the circumstances described by the respondent as follows.
At T14/71-87, the delegate's decision of 8 March 1999 to raise and recover debt, the debt is described as recoverable under sub-section 1223(3) of the Act. The delegate reconsidered the decision on 18 March 1999 (T17) and at T17/98 referred to the following:
"Specific references DIRECTLY relevant to [his or her] reconsideration of the decision/s:
Act: 885 / 891 / 1223(3) 1223(4) 1223(5) 1237A(1) + (1A)
Guide: debt recovery manual"
The authorised review officer on 20 April 1999, giving reasons for his decision to affirm the decision to "raise recoverable debt and recover that debt", stated at T21/112:
"In making my decision, I had regard to the legislation contained in sections 885, 891, 1223, 1237 to 1237AAD and parts of section 1069 of the Act. I have enclosed copies of the relevant legislation for your information."

He stated at T21/113: "Section 1223 of the Act makes this a recoverable debt."

The "relevant legislation enclosed", so far as section 1223 is concerned, sets out only sub-section 1223(3) of the Act. Sub-section 1223 (3) provides:
"Subject to subsection (4), if:
(a) an amount (the received amount) has been paid to a person by way of family allowance; and
(b) the person's rate of family allowance is recalculated under
(i) section 884 (amendment of assessable income); or
(ii) section 885 (underestimate of income); or
(iii) section 886 (failure to notify notifiable event); and
( c) the received amount is more than the amount (the correct amount) of the family allowance payable to the person;
the difference between the received amount and the correct amount is a debt due to the Commonwealth."
The "relevant legislation" enclosed also sets out section 885.
The authorised review officer's decision was thus a decision that section 885 applied as did provisions of section 1223 other than sub-section 1223(1).
The SSAT in its decision stated (T2/5-6):
"Given the nature of the written submission, it is probably worthwhile making clear that the debt has been raised under subsection 1223 (3) and not through any other subsection that might imply a failure of [sic] omission to notify on the part of Mrs Hosking."
The Tribunal agrees and finds that the decision under review is a decision to raise and recover a debt under sub-section 1223(3) of the Act.
The SSAT went on to say (T2/6):
"There is however, evidence before the Tribunal that Mrs Hosking was notified in a letter dated 29 October 1997 that if combined income exceeded $27,057.80 for 1997/98 ie the income free area plus 10%, she was required to notify Centrelink of this change in circumstances.
There is nothing before the Tribunal to suggest that Mrs Hosking complied with this requirement, but, in any event, this finding has not been used in the raising and recovery of any debt."
Before this Tribunal the respondent - quite permissibly in the Tribunal's view - puts forward that sections 885 and 886 have or may have application. That is that sub-section 1223(3) has application because section 885 and/or section 886 have application. The task of this Tribunal is to make the correct, and where applicable preferable, decision. The Tribunal considers that it may in performing its task consider whether the debt was raised under sub-section 1223(3) appropriately because any of its provisions applied. The Tribunal does not however consider it to the point that if there was an overpayment it could have amounted to a recoverable debt under some other sub-section of section 1223 or under some other provision of the Act. To the Tribunal's mind the Tribunal's power is to consider whether it should affirm, vary or set aside the decision made to raise and recover a debt under sub-section 1223(3) of the Act.
In this respect the Tribunal is conscious that in Re Butt (above) the Tribunal decided that "the amount of family payment since 1 October 1997 to which Ms Butt was not entitled is a debt due to the Commonwealth" (but recovery of it should be waived under sub-section 1237A(1) of the Act). The Tribunal in that case also decided that "the rate of family payment to Ms Butt be recalculated from 1 August 1996 in accordance with these reasons". The Tribunal in that case decided that sub-section 1223(3) did not apply but clearly considered (at paragraph 31 of the decision) that sub-sections 1223(1) and (5) would in the event that the recalculation required by it produced an overpayment.
In the present case the Tribunal considers that it ought not go beyond what is in issue namely the debt raised in respect of the overpayment in the period 6 November 1997 to 8 October 1998. The Tribunal has not been asked to consider whether Mrs Hosking's entitlements over a longer period should be recalculated.
The basis for the decision under review is succinctly described by the delegate in his or her recommendation at T17/101:
"… decision to raise and seek recovery of debt is correct as client was paid Family Payment for the period 6.11.97 to 8.10.98 inclusive based on 97/98 estimated income of $16000. This estimate was not within 110% of actual 19997/98 taxable income of $33785. This debt is legally recoverable based on sections 885, 891 and 1223(3) of the Social Security Act. …"

1997 calendar year

The Tribunal finds that from about April in the 1997 calendar year the respondent calculated Mrs Hosking's entitlement using a 1996-97 current year estimate of $30,000 (T4), rather than a 1995-96 base tax year of actual income of $33,785, which had initially been used (T3). The Tribunal has already found that Mrs Hosking did not make a request that an estimate be used. The review form completed by Mrs Hosking on 21 October 1997 (T5) specified actual combined income for 1996-97 as $13,411 and gave an estimate, as the form required, of $16,000 combined income for the year 1997-98 (T5/31; T6/39 and T6/40). The respondent then recalculated payments for the remainder of 1997 on the actual income figure (T7).

1998 calendar year

The Tribunal finds that for the 1998 calendar year, the respondent calculated Mrs Hosking's entitlement using the 1996-97 base tax year ($13,411 combined income) and refers to T8.
27.                The Tribunal should add that the letters of 29 October 1997 (T7) and 10 December 1997 (T8) advising Mrs Hosking of her rate of payment for 1998 required her to notify, amongst other things, "if you or your partner … are self employed and your combined income will be more than $27,057.80 in the 1996/97 or 1997/98 financial year …" (T8/48; T7/45) and that obligation is preceded by a requirement "you must tell us within 14 days after the day on which any of the following things happen or are likely to happen." Barring the Commissioner of Taxation taking a different view of Mr and Mrs Hosking's actual taxable income for 1996/97, in Mrs Hosking's case the financial year for which notification was required was the 1997-98 financial year.
28.                When Mrs Hosking completed her annual review form on 18 October 1998, she advised that she was going to lodge tax returns by 31 October 1998 (T9/50 and T10/57) and gave an estimate, as the form required, of $36,000 combined income for the year 1997-98 (T9/50 and T10/58). (The respondent did not act immediately on what it presumably perceived to be this revised estimate for 1997-98 and has waived the debt it says arose from 21 October 1998 to 31 December 1998 (T15)). In a letter dated 24 February 1999 Mrs Hosking advised the respondent that the actual combined income for 1997-98 was $34,023 (T11/64) and confirmed this on 5 March 1999 (T13). The Tribunal accepts that Mrs Hosking had provided both figures having spoken to their accountant.
29.                As the Tribunal understands it, the respondent says Mrs Hosking was overpaid for the whole of the 1998 calendar year (though has waived recovery for the period 21 October 1998 to 31 December 1998) because those payments had been based on Mrs Hosking's estimate of combined income for 1997-98, namely $16,000. It appears from T7/45, letter dated 29 October 1997, that payments from 6 November 1997 were based on income of $13,411 (that is, the actual combined 1996-97).   As the Tribunal understands it, the respondent considers the rate should be calculated and be recoverable if greater than 110% of the 1997-98 actual combined income of $33,785. The respondent considers that the $16,000 estimate for 1997-98 did not cause a recalculation in 1997 because although the figure of $16,000 represented more than 110% of the base year income (of $13,411), it did not represent more than 110% of the applicable Income Free Area ($24,598). The respondent says it had regard to the estimate of $16,000 for 1997-98 (Exhibit R1 at paragraph 20) in determining the amount of Family Payment payable from 6 November 1997 and 1 January 1998 paydays and recalculation is permissible and the difference between the recalculated amounts and the paid amounts is recoverable as a debt due to the Commonwealth.
In the present matter, the respondent submits (Exhibit R1) that:
"13.… Use of the current tax year can be the consequence of a notifiable event occurring in relation to a person, as specified at points 1069-H18 and 1069-H19 of the Act, or because the person has requested a change to the appropriate tax year, as provided for at points at 1069-H20 to 1069-H22 of the Act. The justification for using the current tax year is that it is more representative of a person's current financial situation.
14,In deciding whether to change the appropriate tax year in such cases the Department has regard to estimates of income for the current tax year."

the law and its aplication here

Point 1069-H13 provides:
"Subject to the following provisions of this Submodule, the appropriate tax year for a family allowance payday is the base tax year for that payday."

Point 1069-H14 provides:

"The base tax year for a family allowance payday is the tax year that ended on 30 June in the calendar year that came immediately before the calendar year in which the payday occurs."

The appropriate or applicable tax year is thus the financial year ending 30 June of the year immediately before the calendar year in which the payday occurs unless the provisions of the submodule following the above provisions apply.
Point 1069-H15 provides:
"If:
(a)       family allowance is payable to a person:
(i)        on the last family allowance payday in one calendar year; and
(ii)       on the first family allowance payday in the next calendar year; and
(b)the person's family allowance rate on the last family allowance payday in the earlier of the 2 calendar years is worked out on the basis that the person's appropriate tax year is the tax year in which the payday occurs (the current tax year); and
(c)the person's family allowance rate on that payday was worked out on that basis because the person had made a request under point 1069-H21;
(d)the person's income for the current tax year is less than the person's income for the base tax year;
the person's appropriate tax year, as from the beginning of the later calendar year, is the current tax year and not the base tax year unless the income for the base tax year is less than the person's income free area."

Point 1069-H21 provides:

"If:
(a)       family allowance:
(i)        is not payable to a person because of this Module; or
(ii)       is payable at a reduced rate because of this Module; and
(b)the person gives the Secretary an estimate of the person's income for a tax year; and
(c)the person requests the Secretary to make a determination under this point; and
(d)the person agrees that the person's rate of family allowance for that tax year is to be recalculated if the person's actual income for that tax year exceeds 110% of the amount estimated by the person;

the Secretary must determine that the appropriate tax year, for the purpose of applying this Module to the person for a family allowance payday on or after the day on which the request is made, is the tax year in which the request is made."

The Tribunal has found that Mrs Hosking did not make a request under point 1069-H21. Therefore point 1069-H15 does not operate so as to have changed Mrs Hosking's appropriate tax year to the current tax year.
If support is needed for this conclusion it is to be found in Re Butt (above). There the Tribunal, comprised by the President Justice O'Connor, Senior Member Hallowes and Member Dr Campbell held at paragraph 25:
"… The meaning of section 1069-H21 is clear. A recipient must request in writing that a determination be made recalculating entitlement to family payment using an estimate provided. The person must agree that the person's rate of family payment for that tax year is to be recalculated if the person's actual income for that tax year exceeds 110 per cent of the amount estimated by the person (subsection 1069-H21 (d)), that is, the person agrees to a recalculation being done in the future when actual figures are known. If the above request is made, and agreement is given, the base tax year changes to the tax year in which the request is made. However, the recalculation only has effect if the actual income exceeds 110 per cent of the amount estimated. The Tribunal finds that Ms Butt did not make a written request that the Secretary use her estimate. She was doing no more than providing estimates as requested by the Secretary. She did not know that she had a choice in the matter."

Section 885 provides:
"(1) If:
(a)in working out the rate of family allowance payable to a person, regard is had to the person's income for a tax year; and
(b)the income to which regard was had consisted of an amount estimated by the person; and
(c)the person's income for that tax year is more than 110% of the amount of income on which the determination of the rate of family allowance was based;
the person's rate of family allowance is to be recalculated on the basis of that income."
It is helpful to set out paragraph 29 of the Tribunal's decision in Re Butt::
"Ms Koller contended that subsection 885(1) of the Act would not apply if Ms Butt's entitlement had been correctly assessed "in the first place". The Tribunal accepts her contention that the Secretary has calculated the rate of family payment incorrectly since, as she put to the Tribunal, March 1997. However, the Tribunal finds that the Secretary has calculated it incorrectly since August 1996. Paragraph 885(1)(a) refers to the working out of a rate of family payment (under section 861, the Family Payment Rate Calculator at the end of section 1069 is to be used), but only if regard was had to an estimate. Similarly, subsections 860 (d) and (e) provide for estimates but no request was made for their use in this matter. Estimates were used but without a request being made under section 1069-H21 and, as Ms Koller contended, section 885 has no work to do in this matter in light of the Tribunal's findings and directions."
As the Tribunal understands Re Butt, the references in sub-sections 860 (d) and (e) to estimates were taken to be estimates the recipient had requested to be used. Following Re Butt, the Tribunal finds that section 885 has no application to Mrs Hosking. In consequence the Tribunal finds that sub-section 1223(3) is inapplicable in so far as paragraph (b) (ii) is concerned. In other words, sub-section 1223(3)(b)(ii) does not operate here to result in a debt due to the Commonwealth.
The Tribunal has already indicated that it can consider whether section 886 has application. Section 886 provides:
"If:
(a)       a notifiable event occurs in relation to a person; and
(b)the person fails to notify the notifiable event in accordance with section 872; and
(d)       the person's income for that year exceeds 110% of:
(i)the person's income for the tax year that is, when the event occurs, the person's base tax year; and
(ii)       the person's income free area at that time;
the person's family allowance rate is to be recalculated on the basis that the person's appropriate tax year is the tax year in which the notifiable event occurred." (Tribunal's emphasis)
The notifiable event in question here is that set out in the letters sent to Mrs Hosking on 29 October 1997 and 10 December 1997. The letters (T7,T8) state:
"WHEN TO CONTACT US
Under Section 872, 873 and 873 (a) of the Social Security Act 1991 (the Act), you must tell us within 14 days after the day on which any of the following things happen or are likely to happen. You can tell us by writing to us, telephoning or coming in and talking to us at any Centrelink office:
You must tell us if you or your partner:

are self employed and your combined income will be more than $27,057.80 in the 1996/97 or 1997/98 financial year …" (Tribunal's emphasis)

Mrs Hosking's evidence is that she understood that "the words 'combined income will be more than …' was that our income had to be definitely more than $27,057.80" before she was required to notify the respondent. The Tribunal can understand the form being read like that but that reading ignores the lead in sentences which, in the Tribunal's opinion, are also part of the notifiable event requirement.
Clearly there will be many situations where a recipient can identify a day where a certain event is likely to happen. The Tribunal also considers that there can be situations where there will be "a day" when it is likely that a person's income will be more than a specified figure and the recipient must notify the respondent within 14 days of the day and in the manner specified.
The Tribunal accepts however that in the case of self-employed people it will often be very difficult or even impossible to say that there has been a day upon which the likelihood that combined income for a financial year will exceed a specified sum arose. That is not to say there will be some, even many, cases where a self-employed person will experience such a day - for example, if a larger than expected contract is secured. The Tribunal accepts Mrs Hosking's evidence that this did not happen in their case and that the first she knew that their combined income was more than $27,057 was when she spoke to her accountant to obtain an estimate as the October review form requested.
Exhibit A1 is a letter dated 17 April 2000 to the Welfare Rights Centre from Ron Berry of Berry & Grosser, Business Management Services. It states:
"…
I am writing to advise that it is very difficult for people in small business to estimate their taxable income prior to completion of year ending accounts. We took over the accounting and taxation work for Mr and Mrs Hosking around the 19th March, 1999 and were asked at that stage to review their year to date results. The reason for the review was that they thought the 1999 results would be worse than the 1998 and maybe (sic) able to vary their provisional tax. The brief overview we undertook at that stage indicates that in fact their results would be similar to the previous year and that provisional tax could not be varied. This was in total contradiction to their thoughts, their Net Income had decreased dramatically.
The above summary is provided to serve as indication that it is very difficult without incurring expense on external accounting fees for small business to accurately estimate their taxable income. For the 1999 year we completed their tax returns in mid October, 1999 and lodge (sic) them on the 28th October, 1999. This was the first time they had a relatively accurate indication of their results for the1999 year and this would have been similar for the prior year.
…"
The Tribunal accepts Mr Berry's statement that there is often difficulty and is satisfied that Mrs Hosking did not and reasonably did not know that their combined income was likely to exceed $27,057 until she asked their then accountant for an estimate. The Tribunal accepts Mrs Hosking's evidence that she advised Centrelink within 14 days of that day that their income was likely to be more than $27,057 by returning the review form to the respondent.
In accordance with the findings above, the Tribunal finds that Mrs Hosking did not "fail to notify the notifiable event in accordance with section 872" as provided by sub-section 886(b). In consequence, the Tribunal finds that sub-section1223(3) is inapplicable in so far as paragraph (b)(iii) is concerned. In other words, sub-section 1223(3)(b)(iii) does not operate here to result in a debt due to the Commonwealth.
Other questions arise from these difficult statutory provisions but, in the Tribunal's view, it is unnecessary and inappropriate to go further. The Tribunal also considers there is no need to consider the question of waiver in the circumstances.
For the reasons given above, the Tribunal sets aside the decision under review and in substitution finds there is no debt due to the Commonwealth that is recoverable under sub-section 1223(3). In the Tribunal's opinion that disposes of the matter.
I certify that the 48 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member W.H. Eyre
Signed:         .....................................................................................
  Personal Assistant
Date/s of Hearing  9 October 2000
Date of Decision  November 2000
Counsel for the Applicant        Mr C. Roberts
Solicitor for the Applicant         Welfare Rights
Counsel for the Respondent    Ms L. Odgers
Solicitor for the Respondent    Centrelink

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Citations

Hosking and Secretary, Department of Family and Community Services [2000] AATA 1051

Cases Citing This Decision

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Cases Cited

2

Statutory Material Cited

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Re Secretary, Department of Family and Community Services and Butt [2000] AATA 623

Re Secretary, Department of Family and Community Services and Dyson [2000] AATA 306