Hulton and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2011] AATA 653

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 653

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2011/1196

GENERAL ADMINISTRATIVE  DIVISION		)
Re		DAVID HULTON

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Ms A F Cunningham (Senior Member)

Date21 September 2011

PlaceHobart

Decision The decision under review is affirmed.

[Sgd Ms A F Cunningham]

Senior Member

CATCHWORDS

SOCIAL SECURITY – family tax benefit – payment by instalments – failure to lodge taxation return within prescribed timeframe – no discretion provided by the legislation to pay FTB arrears – decision under review affirmed

A New Tax System (Family Assistance) (Administration) Act 1999, s 28

REASONS FOR DECISION

21 September 2011 Ms A F Cunningham (Senior Member)   

1.David Hulton, the applicant, seeks the review of a decision to refuse to pay arrears of family tax benefit (FTB) for the 2006/2007 financial year on the basis that he failed to lodge his taxation return for that year within the prescribed timeframe.  Mr Hulton claims that his tax agent mistakenly lodged an income tax return for the year 2007/2008 with the Australian Tax Office (ATO) on 15 April 2009 from source documents that Mr Hulton had provided for the year 2006/2007.  Mr Hulton contends that the failure to lodge the income tax return for the 2006/2007 return within the prescribed time period was not due to his mistake and that it is unjust that he has been underpaid the sum of $7.100.00.

ISSUE

2.The issue for the Tribunal to determine is whether Mr Hulton is entitled to be paid arrears of FTB for the 2006/2007 financial year. 

BACKGROUND FACTS

3.Mr Hulton was paid instalments of FTB for the period 1 July 2006 to 30 June 2007 in total $2,365.20.  His income tax return for the year 2007/2008 was lodged with the ATO on 15 April 2009.  His income tax return for the financial year 2006/2007 was lodged on 13 July 2010. 

4.Mr Hulton had elected to receive FTB by way of instalments in 2006/2007 and was accordingly required to lodge his tax return for that year by 30 June 2008.  As he failed to do so a determination was made on 15 November 2008 that he had no entitlement to FTB and had been overpaid $2365.20. 

5.Following the lodgement of Mr Hulton’s tax return for the 2006/2007 year a reconciliation of his entitlement to FTB was undertaken.  On 17 September 2010 Centrelink decided not to pay arrears of FTB for the 2006/2007 year because Mr Hulton had failed to lodge his income tax return for that year by 30 June 2009.  Centrelink determined that Mr Hulton was entitled to the instalment payments made and that no debt arose.  The arrears of FTB were calculated at $9541.10 but not paid as Mr Hulton had failed to lodge his tax return for the 2006/2007 year within the time prescribed by the legislation. 

6.Mr Hulton sought a review of Centrelink’s decision which was affirmed by an authorised review officer and by the Social Security Appeals Tribunal (SSAT).

LEGISLATION

7.The relevant legislation is found in the A New Tax System (Family Assistance) (Administration) Act 1999 (herein after referred to as the Act) and in particular section 28:

“Variation of instalment and past period entitlement determinations where income tax return not lodged

(1)  This section applies if:

(a)  a determination under section 16 or 17 is in force at, or was in force before, a particular time; and

(b)  there are one or more days (the cancellation days ) before the particular time in respect of which the following conditions are satisfied:

(i)  the cancellation days occur in the income year (the cancellation income year ) that began 2 years before the beginning of the income year in which the particular time occurs;

(ii)  the claimant is entitled to be paid family tax benefit under the determination for the cancellation days;

(iii)  the claimant, or the claimant's partner at the particular time (if he or she was also the claimant's partner at some time in the cancellation income year), or both, are required to lodge an income tax return for the cancellation income year but have not done so by the particular time;

(iv)  by the particular time, an assessment has not been made under the Income Tax Assessment Act 1936 of the taxable income for the cancellation income year of everyone to whom subparagraph (iii) applies.

Consequence of section applying

(2)  If this section applies, the Secretary must vary the determination so that it has the effect that the claimant is not, and never was, entitled to family tax benefit for the cancellation days.

Consequence where income tax returns are later lodged

(3)  If:

(a)  after the Secretary varies the determination under subsection (2) or (6), an assessment is made under the Income Tax Assessment Act 1936 for the cancellation income year for everyone (the taxpayers involved ):

(i)  who was required to lodge an income tax return as mentioned in subparagraph (1)(b)(iii); and

(ii)  in respect of whom an assessment had not been made before the determination was varied; and

(b)  the Secretary is satisfied that the claimant was eligible for an amount (the recalculated amount ) of family tax benefit for the cancellation days; and

(ba)  subsection (4) (which is about when the claimant and the claimant's partner separate after the determination is varied) does not apply;

the Secretary must again vary the determination so that it has the effect that, for the cancellation days, the claimant is entitled to be paid:

(c)  if income tax returns for the cancellation income year for the taxpayers involved were lodged with the Commissioner of Taxation during the income year that began 2 years after the beginning of the cancellation income year--the recalculated amount; or

(d)  in any other case--the lesser of:

(i)  the recalculated amount; and

(ii)  the amount that the claimant was entitled to be paid before the variation under subsection (2) was made.

Consequence where claimant and partner separate after determination varied”

8.Sub-sections 1 and 2 of section 28 provide that if an FTB claimant fails to lodge an income tax return for two years, the person is taken not to have been entitled to FTB for that two year period (the cancellation day).  Section 28(3) provides that where the income tax returns are subsequently lodged within two years and provided the Secretary is satisfied that the claimant was eligible for a recalculated amount of FTB for the cancellation days, then a further determination can be made.  Pursuant to sub-paragraph 3(d) the claimant is paid the lesser of either the recalculated amount or the amount that the claimant was entitled to be paid before the variation under sub-section 2 was made. 

CONSIDERATION

9.Mr Hulton elected to receive FTB by way of instalments based on an estimate of his income.  In such circumstances the legislation provides for a reconciliation process whereby at the end of the relevant income year, the actual income of the person (and partner if any) is compared with the estimated income provided at various times during the year and on which FTB instalments were based.  The amount of FTB actually received during the year based on the income estimates is then compared with the correct entitlement based on actual income.  If the amount paid is less than the reconciled entitlement, the claimant is paid this amount and if it is less a debt is created.

10.Determinations of instalment entitlements are made pursuant to section 16 of the Act.  Mr Hulton’s eligibility is not in question.  If he had lodged his income tax return for the financial year 2006/2007 on or before 30 June 2008, based on the ATO’s assessment, he would have been entitled to arrears of FTB in the sum of $9,541.10.

11.It was Mr Hulton’s evidence that he provided his accountant with the relevant financial information for the year 2006/2007.  However his accountant mistakenly included this information on an Individual Tax Return form for the financial year 1 July 2007 to 30 June 2008 which was lodged with the ATO on 15 April 2009.  Mr Hulton’s income tax return for the financial year in question namely, 2006/2007 was not lodged until 13 July 2010 which was more than two years from the period referred to in section 28 of the Act as outlined above. 

12.Mr Hulton was referred to a Centrelink letter (T3) which he did not dispute receiving although he had no specific recollection of having done so.  The letter advised that the amount of his FTB received from 1 July 2006 to 30 June 2007 was based on an estimate of his family’s income.  The letter further advised that Centrelink records indicated that Mr Hulton had not lodged a tax return for the financial year and that he should do immediately or advise Centrelink before 30 June 2008. 

13.There was no dispute that Mr Hulton was obliged to lodge an income tax return for the relevant year as he was in receipt of assessable taxable income.  Mr Hulton did not contend that he was unaware of the requirement to lodge his taxation return by the 30 June 2008.  Mr Hulton said that he had over-estimated his income so that he would not incur a debt that he would be required to repay. 

14.It was Mr Hulton’s contention that whilst he acknowledged that his tax return for the 2006/2007 year had not been lodged by 30 June 2008, it was his understanding that the tax return lodged by his accountant on 15 April 2009 was for the tax year 2006/2007.  He had provided his accountant with the financial information for that tax year.  Mr Hulton acknowledged however, that he would have signed the tax return lodged on 15 April 2009 which clearly states that it is a 2008 rather than 2007 tax return. 

15.Unfortunately section 28 permits no discretion to recalculate Mr Hulton’s entitlement to payment.  Section 28 is clear in its terms and only permits a recalculation where the tax return has been lodged within two years from the beginning of the income year, in this case by 30 June 2009.  As the financial year 2006/2007 was not lodged until 13 July 2010 the unavoidable consequence is that he is not entitled to arrears of FTB for that financial year.

16.Accordingly the decision under review is affirmed.

I certify that the 16 preceding paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Senior Member)

Signed:   R Hunt - Associate

Date/s of Hearing  24 August 2011
Date of Decision  21 September 2011
Solicitor for the Applicant          Applicant on his own behalf

Solicitor for the Respondent     Mr B Sparkes, Program Litigation and Review Branch