Josephson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2008] AATA 711
•14 August 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 711
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2007/5661
GENERAL ADMINISTRATIVE DIVISION ) Re KEVIN JOSEPHSON Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Dr M Denovan, Member Date14 August 2008
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ...............[Sgd]...............................
Member
CATCHWORDS
SOCIAL SECURITY – Pensions, Benefits and Allowances – family tax benefit – overpayment of family tax benefit – debt cannot be written off – debt cannot be waivered – debt due to administrative error by Commonwealth – no financial hardship – no special circumstances – decision under review affirmed.
A New Tax System (Family Assistance) Act 1999
A New Tax System (Family Assistance)(Administration) Act 1999
Feneley v Secretary, Department of Family and Community Services [2003] AATA 496
Re Beadle v Director-General of Social Security (1984) 6 ALD 1
Dranichnikov v Centrelink (2003) 75 ALD 134
REASONS FOR DECISION
14 August 2008 Dr M Denovan INTRODUCTION
1. Mr Josephson was over paid family tax benefit during the financial years 2004 to 2007. I have to decide whether the excess should be recovered.
BACKGROUND
2. Mr Josephson is the father of two children, A and R.
3. On 17 March 2004 the Family Court of Australia made an interim consent orders relating to the applicant’s children, A and R[1], the practical affect of which resulted in Mr Josephson having 78% of the care of A, and 22% of the care of R.
[1] Exhibit 1, T4
4. At that time Mr Josephson was being paid family tax benefit on the basis of having 100% care of A, but was not receiving payments for R[2].
[2] Exhibit 1, T37
5. On 24 September 2004 Mr Josephson contacted Centrelink and requested that R be registered for childcare assistance. Mr Josephson was advised that R was not listed as a dependant of his.
6. On 29 September 2004 Mr Josephson lodged a claim for family tax benefit for both A and R[3].
[3] Exhibit1, T7
7. Mr Josephson provided a copy of the Family Court interim consent orders made on 17 March 2004 to Centrelink at that time, and this copy was included with the claim[4].
[4] Exhibit 1, T7
8. On 1 October 2004 a Centrelink officer made an electronic note, which indicated that Mr Josephson requested that his family tax benefit claim be withdrawn[5].
[5] Exhibit 1, T10
9. On 7 October 2004 a Centrelink officer spoke to the applicant and noted that Mr Josephson wanted to continue with family tax benefit claim. A telephone appointment was made with Mr Josephson for the next day[6], however that appointment was cancelled[7]
[6] Exhibit 1, T10
[7] Exhibit 1, T10
10. On 11 October 2004 Mr Josephson contacted Centrelink regarding childcare benefit for R. At that time it was noted that he did not want to claim family tax benefit for R so long as childcare has been sorted out[8].
[8] Exhibit 1, T10, F 75
11. On 13 December 2004 the Family Court of Australia made final consent orders to a similar effect of the interim orders made in March 2004[9].
[9] Exhibit 1, T16, F 86
12. Between 13 December 2004 and 30 June 2007, despite having been provided with a copy of the Family Court consent orders, Centrelink continued to pay Mr Josephson family tax benefit Part A and Part B at the rate of 100% on the basis that he was having sole care of A during that period.
13. On 5 July 2007 the applicant and the children’s mother lodged claims for family tax benefit together with copies of court orders[10].
[10] Exhibit 1, T12, T13, T16,
14. On 25 July 2007 Centrelink determined that Mr Josephson had been overpaid family tax benefit from 13 December 2004 to 30 June 2007 by $1285.64, and that the debt should be recovered.[11]
[11] Exhibit 1 T30 F 138
15. Mr Josephson was dissatisfied with the decision of Centrelink, and he requested a review of the decision. On 8 August 2007 the original decision maker affirmed the decision[12].
[12] Exhibit 1, T28 F135
16. On 3 September 2007 an Authorised Review Officer affirmed the decision[13].
[13] Exhibit 1, T36 F 148
17. Mr Josephson applied to the Social Security Appeals Tribunal (SSAT) for review of the decision. The decision was affirmed by the SSAT on 31 October 2007[14].
[14] Exhibit 1, T2
18. The application for review by the Administrative Appeals Tribunal was lodged on 21 November 2007[15].
[15] Exhibit 1, T1
Legislative Framework
19. The relevant legislation is contained in the A New Tax System (Family Assistance) Act 1999 (“the Act”) and A New Tax System (Family Assistance)(Administration) Act 1999 (“the Administration Act”).
20. There are two mechanisms available under the Administration Act, which permit a debt of family tax benefit not to be recovered. That is write off and waiver.
21. Section 95 of the Administration Act provides the criteria under which a determination can be made to write off a debt.
22. It provides that a debt can be written off if:
1. The debt is irrecoverable at law; or
2. The debtor has no capacity to repay the debt.
23. Section 95(4) provides that a person is taken to have capacity to repay the debt unless recovery would cause the person severe financial hardship.
24. Section 97 of the Administration Act requires the Secretary to waive that part of the debt if it is attributable solely to administrative error, if the debtor received in good faith the payment, and the person would suffer financial hardship if the debt were not waived.
25. Section 101 of the Administration Act provides an alternative way that a debt can be waived, that is if there are special circumstances.
Consideration
Can the debt be written off?
26. The Secretary contends that the debt is recoverable as Mr Josephson is not in severe financial hardship, as he is employed and capable of making repayments toward the debt, so there is no basis to write this debt off pursuant to s 95 of the Administration Act.
27. Mr Josephson argues that his financial situation has been extremely desperate, especially over the last 12 months. He explained that in May 2007 he received an eviction notice from the real estate agent as he was in arrears in his rent. He was unable to pay the rent owing and was also ‘black listed’ by the agent in relation to a previous dispute. As a consequence Mr Josephson was unable to rent accommodation and his only option was to seek assistance from Family Haven. Family Haven provided accommodation for himself and his daughter at a cost of $177 one week, and $160 every second week. This money was taken out of his Centrelink benefits.
28. Mr Josephson is currently living in rental accommodation for $165 a week. He was unable to secure rental accommodation until he successfully petitioned the real estate agency to remove his name from the black list.
29. In addition to rent, Mr Josephson is paying $120 a week car loan, $2200 a year school fees for A, $25 a fortnight electricity, $91 a week personal loan, taken out initially to repay cumulated debts, $70-90 a week for groceries, and $200-300 a month for meat. He naturally had additional expenses for petrol, car maintenance, day-to-day incidentals, and child clothing and child entertainment.
30. For the last 12 months Mr Josephson has been working for himself as a defence trainer. He is undergoing training through The Sarina Russo Group, and is now earning approximately $800 a month after expenses. Mr Josephson is keen to continue to grow his business. He currently works approximately 17 hours a week.
31. Section 95, which provides that a debt can be written off in some, limited circumstances. In brief, this section of the Act provides that a debt can be written off if the debtor has no capacity to repay the debt. If a debtor is able to repay the debt by way of periodic payments, as Mr Josephson is currently doing, then the debtor is taken to have the capacity to repay the debt unless recovery by that means would cause the person severe financial hardship.
32. Mr Josephson’s financial circumstances are certainly difficult. His income from business earnings varies, and at best over the past 12 months has been approximately $900 per month. This income in addition to parenting payment and family tax benefit means that his total monthly income would barely meet these basic monthly expenses. Centrelink apparently recognised this and reduced the repayments from $50 a week to $20 a week. Fortunately Mr Josephson’s business appears to be taking off and his capacity to repay the remaining debt, approximately $800, appears to have improved somewhat in recent months.
33. In these circumstances it cannot be said that recovery of the debt would cause financial hardship. I therefore find that the debt is recoverable at law and Mr Josephson has capacity to repay the debt, so there is no reason under s 95 of the Administration Act to write off Mr Josephson’s debt.
Can the debt be waived?
34. For a debt to be waived pursuant to s 97 of the Administration Act it must be due solely to administrative error.
35. Mr Josephson argues that the debt was solely due to Centrelink because his claim for family tax benefit was mismanaged. He explained that he approached Centrelink in September 2004 by telephone because he required assistance with childcare payments when his youngest daughter R was in his care. He was told that he was currently not entitled to assistance for childcare fees, as R was not listed as a dependant of his. A few days later Mr Josephson attended a Centrelink office in person, and at that time provided a copy of the interim Family Court orders made in March 2004. At that time Centrelink told him he would be required to complete certain forms in order to be entitled to child care assistance benefits. He was handed family tax benefit application forms and he completed these forms.
36. Mr Josephson said that he had initially also intended to claim disability allowance for R, but decided that he did not want to disadvantage R’s care, and he subsequently told Centrelink that he did not wish to continue with a claim for that payment. It is Mr Josephson’s evidence that at no time did he inform Centrelink that he did not wish to continue his claim for family tax benefit.
37. Mr Josephson was not aware that Centrelink had not processed his claim for family tax benefit for R until the debt was raised in 2007. At the time Mr Josephson filled in the applications for family tax benefit he was involved in difficult and emotionally draining Family Court proceedings. The amount of child care fees he pays has always varied according to the time, amount or type of care provided, and as a consequence Mr Josephson did not notice any alteration in benefits that would have alerted him to the fact that Centrelink had not processed his claim.
38. Mr Josephson believes that had Centrelink processed his claim for family tax benefit for R in 2004 then he would not have been overpaid and no debt would have arisen.
39. The Secretary accepts that Mr Josephson provided Centrelink with a copy of the Family Court Order dated 17 March 2004, and that Centrelink did not calculate share care percentage for Mr Josephson based on the order. It was submitted that as the Family Court Order was attached to a claim for family tax benefit for his youngest child, which was withdrawn, there was no obligation on Centrelink to use the information to calculate the correct rate of family tax benefit for his eldest child A. I disagree.
40. Mr Josephson provided Centrelink with a copy of the Family Court Order when he was told that his youngest child was not listed as a dependant. Not withstanding that Mr Josephson may have withdrawn his application for family tax benefit, Centrelink should have used the information to ensure the correct rate of family tax benefit for A was paid to Mr Josephson.
41. The respondent also submitted that as the Family Court Orders provided by Mr Josephson in 2004 were of an interim nature, Centrelink was not obliged to give effect to these orders. I disagree. The nature of most Centrelink benefits is such that regular adjustments are made to payments to adjust for the ever-changing circumstances of people’s life. That the orders were of an interim nature does not change the fact that at the time Centrelink obtained a copy of those orders they reflected the current level of care provided by Mr Josephson for his children and his family tax benefits should have been calculated accordingly, notwithstanding the fact that the orders might change some time in the future.
42. The very fact that there was a Family Court Order, which dealt with the custody of the children, should have immediately alerted the Centrelink Officer that Mr Josephson might not have been entitled to 100% of the FTB for his oldest child.
43. I do not accept the suggestion by the Respondent that the working of section 59 of the Admin Act implies Centrelink has discretion but not an obligation to calculate the rate of family tax benefit an individual should be paid.
44. The respondent made submissions to the effect that the debt occurred as a result of the mother of the children claiming family tax benefit for both children in 2007, and so it cannot be said that the debt is due solely to administrative error. I do not accept this argument. Weather or not the mother of the children made a claim is relevant only in that that is the event that lead Centrelink to be aware that Mr Josephson had been overpaid. It is of no consequence how Centrelink ultimately became aware of that fact. Had that administrative error not occurred, the overpayment that is the subject of this appeal would not have occurred.
45. I am satisfied the entire debt is solely due to an administrative error made by the Commonwealth. The Respondent accepts that the overpayment was received in good faith and I accept Mr Josephson’s evidence that that is the case.
46. For the provisions of s97 (1) to apply, Mr Josephson must demonstrate that he would suffer severe financial hardship if the debt were not waived.
47. The meaning of severe financial hardship has not been defined in the Administration Act. Its meaning was addressed in Feneley v Secretary, Department of Family and Community Services[16] in which it was noted that the meaning of the term
“…while not implying destitution goes beyond straightened financial circumstances and imports a need for the particular circumstances of a person to include suffering of a severe or extreme nature”.
[16] [2003] AATA 496
48. Mr Josephson referred to the unfortunate circumstances that he found himself in, having to financially support his daughter through private education, whilst living in crisis accommodation, repaying loans and having a very limited income. Additionally, Mr Josephson said that she felt that he should not have to repay the debt because it was not his fault, and the debt would not have arisen but for Centrelink’s error. Mr Josephson said that whilst he acknowledged that his financial situation had improved somewhat since the success of his business, during the time that the debt was incurred and for the last twelve months he has been suffering financial hardship.
49. I am sure Mr Josephson’s financial situation is strained. His decision to send his daughter to private schooling is admirable and reflects his commitment to his parental responsibilities. It is the case however that such an expense is not essential, his daughter would receive education in the state system if Mr Josephson discontinued her private education. I am satisfied that it cannot be said that Mr Josephson would suffer severe financial hardship if his debt were not waived.
50. Turning to the waiver in special circumstances provided for by s101 of the Administration Act. Whilst special circumstances are not defined in the Administration Act, the approach to be taken in interpretation and application of the discretionary provisions has been dealt with by the Tribunal and the Federal Court in numerous circumstances.
51. In Re Beadle v Director-General of Social Security[17] it was said,
“The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context, which allows one to say that the circumstances in one case are markedly different from the unusual, run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special”.
[17] (1984) 6 ALD 1 at 3
52. In Dranichnikov v Centrelink[18] the Full Federal Court when considering the meaning of special circumstances observed:
“….what is required will be circumstances which distinguish the case in consideration from the usual case. There will be a requirement that the circumstances are such that takes the case out of the ordinary…”
[18] (2003) 75 ALD 134 at 148
53. By way of special circumstances, Mr Josephson pointed out to me the fact that in 2004 he was overwhelmed by family court proceedings, causing him severe emotion stress. Further the mother of his children has initiated further family court proceedings and is now seeking sole care of A on the grounds that Mr Josephson has failed to adequately provide for her whilst he was residing in emergency accommodation. Furthermore, he said that his daughter was having difficulties at her previous state school and the move to a private school provided her with stability. Mr Josephson further pointed out that he is attempting to make a success of his own business, and a requirement to receive government assistance for establishing that business and receiving training from The Sarina Russo Group, he must remain on some form of Centrelink benefits. His income in the short term at least is therefore limited.
54. I do not doubt that Mr Josephson has suffered a considerable amount of stress associated with the relationship breakdown and protracted family court proceedings. Whilst regrettable, this does not justify departure from the general rule.
55. It was Mr Josephson’s evidence that his business is improving and becoming more successful financially, and that he feels the $20 a week that is currently paying towards his debt could be placed in account for future expenses in relation to A.
56. Mr Josephson is dependant of Centrelink payments and he needs to take care with his expenses. I am satisfied that there are no other circumstances which are so unusual, uncommon or exceptional as to justify a finding of special circumstances in this case.
57. That being so I find that it is not possible to exercise discretion to waive Mr Josephson’s debt pursuant to s101 of the Administration Act. The debt due to the Commonwealth cannot be written off or waived under the discretionary provisions of the Administration Act, and I affirm the decision under review.
DECISION
58. I affirm the decision under review.
I certify that the 58 preceding paragraphs are a true copy of the reasons for the decision herein of Dr M Denovan, Member
Signed:...........................[Sgd}...................................................
Elizabeth Young, Research AssociateDate of Hearing 18 June 2008
Date of Decision 14 August 2008
The applicant was unrepresented
Solicitor for the Respondent Mr Joe Guthrie, departmental advocate
2