Johnson; Secretary, Department of Social Services and (Social services second review)

[2016] AATA 304

Johnson; Secretary, Department of Social Services and (Social services second review) [2016] AATA 304 (12 May 2016)

Division	GENERAL DIVISION
File Number(s)	2015/3512
Re	Secretary, Department of Social Services
APPLICANT
And	Andrew Johnson
RESPONDENT

DECISION

Tribunal	Deputy President Bernard McCabe
Date	12 May 2016
Place	Brisbane

The decision under review is set aside. The Tribunal finds in substitution that the discretion to extend time cannot be exercised.

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Deputy President Bernard McCabe

Catchwords

FAMILY TAX BENEFIT - late lodgement of taxation return – failure of respondent’s accountants to lodge income tax return – whether special circumstances prevented applicant from lodging income tax return – decision under review is set aside and substituted

Legislation

A New Tax System (Family Assistance) (Administration) Act 1999 (Cth)

Cases

Secretary, Department of Social Services and Cannon [2015] AATA 1028

REASONS FOR DECISION

Deputy President Bernard McCabe 

12 May 2016

1. Mr Andrew Johnson was in receipt of the family tax benefit (FTB) during the 2012-2013 financial year. In the ordinary course, he was entitled to receive a ‘top-up’ payment at the end of the financial year after he lodged his tax returns. But there is a catch: the law says he must lodge the return before the end of the next financial year (ie: before 30 June 2014) if he is to receive the top-up payment. That did not occur in this case. There is discretion to effectively extend the time if the claimant was prevented from lodging their return because of special circumstances. The former Social Security Appeals Tribunal (the SSAT) decided special circumstances existed in this case and allowed Mr Johnson to receive the top-up; the Secretary of the Department of Social Services asked this Tribunal to reconsider that decision.

2. Mr Johnson blames his accountant for the delay in lodging his return. If I accept that is so, I am required to determine whether that does amount to special circumstances that prevented the applicant from filing his return within the relevant financial year – and  whether the discretion to extend time should be exercised in his favour.

   What happened?

3. There does not seem to be a dispute over the facts. What follows is drawn from the oral evidence provided by the applicant at the hearing and the evidence provided by his accounting firm.

4. Mr Johnson engaged the services of the accounting firm to complete his tax returns for the 2012-2013 financial year in around April 2014. Mr Johnson said he was told by the accountant he dealt with at the firm’s Noosa office that the returns would be prepared in the ordinary course – that is, by about 15 May 2014. I draw that inference in light of the statement of Ms Leesa Bavell, a director of the firm: exhibit one at p. 9. Ms Bavell explained there was a “usual office protocol” that governed the preparation of returns in a timely way. I note Ms Bavell’s concession in her oral evidence that the firm was conscious of the need to complete returns so clients could lodge the returns and claim the FTB top-up before the deadline.

5. The Noosa office of the firm was plunged in to crisis before the work was done. The accountant with whom Mr Johnson was dealing apparently walked out of the office in extraordinary circumstances before the end of June 2014. He just disappeared. The office was closed. Nobody was there to return calls. Clients were not immediately told of the problem. The end of the financial year passed, and with it, the deadline for lodging tax returns where the claimant might be eligible for an FTB top-up payment.

6. Mr Johnson was not aware of all this until after the end of the financial year. If he had been told there was a problem, he might have done something about it. But he was left in the dark until it was too late.

   The legislation

7. The relevant law is contained in the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the Administration Act). Section 32C of the Administration Act deals with reconciliation times for persons who are members of a couple - which includes Mr Johnson. Sub-section (3) requires that persons in Mr Johnson’s position file their return by the end of ‘the first income year after the relevant income year’ (ie, by 30 June 2014) or within:

   …such further period (if any) as the Secretary allows…to lodge the return…if the Secretary is satisfied that there are special circumstances that prevented the… individual from lodging the return before the end of that first income year.

8. The expression ‘special circumstances’ is used in the social security legislation. Its meaning in that context is well understood. But it is important to remember the special circumstances discretion in the Administration Act is qualified: it is not a general discretion to exempt someone from the application of the ordinary rule because of unusual or exceptional circumstances. The discretion is only available where there are special circumstances that prevent the claimant from lodging his or her return before the deadline.

9. My attention was drawn to the Tribunal’s decision in Secretary, Department of Social Services and Cannon [2015] AATA 1028. In that decision, Deputy President Constance (at [19]-[20]) referred to the procedures manual used by the Secretary’s staff to assess applications for extensions due to special circumstances in the year of income in question. Extracts from the manual were produced in these proceedings. After setting out a reasonable working definition of the special circumstances concept at p. 3, the manual goes on to offer examples of reasons that generally would not amount to special circumstances. While the manual observes elsewhere (at p. 7) that “special circumstances are by their very nature incapable of precise or exhaustive definition”, the manual adds in a note at p. 4:

   …an extension must not be granted if a tax agent/accountant advises they were the cause of the late lodgement of tax returns even if the customer provided financial records before 30 June. Tax agents/accountants were advised of changes to lodgement periods. [Emphasis in original]

10. That sort of categorical statement is inconsistent with the purpose of the special circumstances discretion. While I agree with Deputy President Constance in Cannon that it is appropriate to have regard to policy, there can be no suggestion I am bound to apply it if I disagree with what is said – and I think the statement of policy I cited above goes too far.

11. In this case, I take into account the fact Mr Johnson clearly knew (or should have known) of his obligation to file his tax returns before 30 June 2014. There is no dispute he received notices to that effect from the Secretary, and ignorance of the law would not ordinarily be an excuse in any event. I also take into account the fact Mr Johnson’s accountants were aware of the obligation. Most importantly, though, I am conscious of the fact Mr Johnson was not actually prevented from filing the return by the admittedly unusual behaviour of his accountant. The evidence suggests Mr Johnson was not aware of the bad behaviour while it was going on. If he had tried to contact the accountant before the deadline to ask about the fate of his tax returns and then been prevented from making other arrangements - because the firm would not respond to his calls or release the documents he needed to take his business elsewhere or complete the returns himself – that may have amounted to special circumstances that prevented him from filing the return in a timely way. But that is not what happened. As far as Mr Johnson was concerned, his accountants simply failed to file the returns in a timely way because of internal issues. Their behaviour did not prevent him from acting; they just failed to act on his instructions. There is nothing unusual or extraordinary about that.

    Conclusion

12. I am not satisfied there are special circumstances that prevented Mr Johnson from filing his return by the deadline. I must therefore set aside the decision under review. I find in substitution that the discretion to extend time in s 32C(1) of the Administration Act cannot be exercised in Mr Johnson’s favour.

I certify that the preceding 12 (twelve) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard McCabe.

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Associate

Dated 12 May 2016

Date of hearing	5 February 2016
Solicitor for the Applicant	Mr A Burgess, Sparke Helmore Lawyers
Respondent	By telephone