Kelly and Secretary, Department of Employment and Workplace Relations
[2006] AATA 594
•5 July 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 594
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/193
GENERAL ADMINISTRATIVE DIVISION ) Re JENNIFER KELLY Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Dr KS Levy, Member Date 5 July 2006
PlaceBrisbane
Decision The decision under review is affirmed.
........[Sgd].........
KS Levy
Member
CATCHWORDS
SOCIAL SECURITY – parenting payment – waiver of debt – debt not due solely to administrative error – knowingly – gross income – decision affirmed.
Social Security Act 1991 ss 1068, 1223, 1236, 1237
Department of Social Security and Hales (1998) 82 FCR 154, 153 ALR 259
Sekhon v Secretary, Department of Family and Community Services (2003) FCAFC 190
Minister for Immigration and Multicultural Affairs v Rajamanikkam (2002) 210 CLR 222
Dranichnikov v Centrelink (2003) 75 ALD 134
Groth v Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Hales (1998) 153 ALR 259Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435 at 445
Watts and Secretary, Department of Family and Community Services [2004] AATA 1398
Vines v Djordjevitch (1955) 91 CLR 512
REASONS FOR DECISION
5 July 2006 Dr KS Levy, Member Introduction
1. This application arises from a decision by Centrelink dated 17 August 2005 to raise and recover a debt of $5,018.20 for the period 27 August 2003 to 8 February 2005 in respect of an amount of parenting payment which the respondent claims is a debt owed by the applicant.
2. The original decision was reviewed at the request of the applicant by an authorised review officer (ARO) who upheld the original decision of Centrelink by letter dated 18 November 2005. The applicant then sought a review of the decision by the Social Security Appeals Tribunal (SSAT). That Tribunal also upheld the original decision of Centrelink, with its decision dated 20 February 2006. The applicant now seeks further review by this Tribunal.
3. The applicant, Mrs Jennifer Kelly, represented herself. The respondent was represented by Mr Matthew Black, Advocate for the Department of Employment and Workplace Relations.
Issues
4. The following questions were submitted for the decision of this Tribunal:
(a)Has Mrs Kelly been overpaid parenting payment for the relevant period;
(b)If the answer to question (a) is “yes”, is the overpayment a debt due to the Commonwealth?
(c)If questions (a) and (b) are answered in the affirmative, should all or part of the debt be recovered, or are there grounds for write-off or waiver?
Legislation
5. The following statutory provisions are relevant to this application:
“Section 1068B-G1.
This is how to work out the effect of a person’s ordinary income, and the ordinary income of the person’s partner, on the person’s maximum payment rate:
1223.(1) Subject to this section, if:
(a)a social security payment is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
1236.(1A) 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.
1236.(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a) deductions from the debtor’s social security payment; or
(b)deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or
(c) setting off under section 84A of that Act;
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
1237A.(1) Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
1237AAD.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 false representation; or
(ii) failing or omitting to comply with a provision of this Act or the 1947 Act; 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.
Note 1: Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth.
Note 2: This section has effect subject to section 1237AAE in relation to an assurance of support debt.”
Evidence
6. The following documents were admitted into evidence:
Exhibit 1T documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
Exhibit 2Attachment A to the Secretary’s Statement of Facts and Contentions
Exhibit 3The applicant’s Statement of Financial Circumstances
Exhibit 4Medical certificate of the Condamine Medical Centre dated 18 May 2006
7. The amount in question in this matter resulted from Mrs Kelly receiving parenting payment for the debt period and for which concurrently, she had under-reported her husband’s gross income. The original decision of the SSAT also considered a debt raised by Centrelink in respect of the applicant’s husband. However, it was clarified that that aspect of the original decision is not under review.
8. Mrs Kelly stated in evidence that when she was first entitled to parenting payment, she had had no experience in dealing with Centrelink previously or with their requirements. She did not know she had to report “gross” income. Also, at the start of this period, her husband was working in Brisbane and she did not always know what he was earning until there was a credit to their bank account. In this period, she was at times trying to estimate what he might have earned so that she could report to Centrelink. In those cases, her evidence was that she tried to report on the higher side when estimating, rather than trying to understate her husband’s potential earnings.
9. The applicant’s husband worked for the Main Roads Department and was not on a fixed fortnightly income. His hours varied and at times he did overtime. Consequently, she was not in a position to always report accurately on the reporting dates. She had some assistance from her father-in-law who, coincidentally, was the head of the pay roll section with her husband’s employer. When requested, he was able to advise her or assist her about her husband’s earnings so that she could undertake her reporting responsibilities to Centrelink. However, she did not recall what information her father-in-law had provided to her and could not recall whether he differentiated gross pay from net pay.
10. The applicant’s main ground of dispute was the fact that Centrelink did not review the matter earlier so that the debt built up to the extent that it had. The applicant also tendered a document (Exhibit 4) which highlighted that one of her children had a medical condition in 2004 and that she has now recovered. She argued that the child could potentially have further expenditure for her condition somewhere in the future and submitted that that should be a consideration as to her liability to repay the debt. She also referred to the first correspondence that she had from Centrelink which was dated 7 February 2002.
11. Mr Black cross-examined the applicant and referred to the reporting requirements in relation to her husband’s newstart allowance. She stated however, that on occasions that she reported amounts her husband had earned even though the amounts were not in the bank. The respondent then referred to the letters in Exhibit 2 dated 20 October 2003, 13 January 2004 and 1 March 2004. These letters informed the applicant what must be reported for each Centrelink reporting period. One point advised the applicant that she must report “the gross amount you/your partner earned (before tax or other deductions)”. The wording was the same in each of the three letters submitted at Exhibit 2.
12. The respondent then referred the applicant and the Tribunal to T18 folio 57. This was a summary of verified earnings for the applicant’s husband. It contains a table of “apportioned earnings” on one half of the page which shows, for various fortnights between the periods commencing 13 August 2003 and the fortnight commencing 20 August 2005, the amount declared as having been earned. From that information, the Department has estimated a daily amount and then projected an annualised figure based on the earnings of that fortnight. On the other half of the page, “verified earnings” are shown which is a result of Centrelink’s seeking records from the applicant’s husband’s employer and then comparing the amounts reported with the amounts actually earned.
13. In cross examination, the respondent’s advocate referred the applicant to a number of examples under the heading “apportioned earnings” and pointed out that the amount declared in particular fortnights were less than the gross earnings reported by her husband’s employer and in some cases were very substantially below the amounts advised by the employer. The amounts provided by the employer were a result of letters forwarded by Centrelink to the Main Roads Department section (see T16 folio 34).
14. The respondent also referred to T14 folios 31 and 32 (a copy of the letter of 7 February 2005), which the applicant had previously stated was the first correspondence from the respondent as a result of her contacting the Department. The respondent’s advocate disputed this assertion and submitted to the Tribunal that T14 folios 31 and 32, a letter dated 7 February 2005, was in fact, a letter from Centrelink to the applicant advising her that Centrelink undertakes a comparison of records with the Australian Taxation Office.
15. The applicant nevertheless maintained that she had contacted Centrelink some time before Christmas in 2004 enquiring as to the proper reporting practice as a result of an advertisement she had seen which indicated that gross income must be reported. She claims that this was the triggering event which initiated a query by her and which revealed the overpayment.
16. The respondent’s advocate also referred the applicant to the ARO’s notes (see T28 folio 72). The second last dot point in that document states “Jenny said that she realised she was doing this wrongly after talking to a Centrelink officer, who explained that gross earnings must be declared”. Again, Mrs Kelly disagreed with that record and reiterated that she had told the Centrelink officer that she was reporting wrongly.
17. As a result of a question from the Tribunal, it was clarified that the summary income and reported income (T18 folio 57) was an estimated amount by Centrelink. This is the amount shown under the “apportioned earnings” columns referred to earlier. It was clear from this record however, that the applicant’s reporting was not altogether consistent and that it appeared at least in September 2003 (approximately) that she had reported gross earnings or an amount that closely approximated gross earnings. The applicant also responded that she may have reported gross earnings on some occasions but seemed a little unclear as it was now some years ago.
Submissions
18. The applicant submitted that she has already started paying back the debt. She pointed out that even though she has been having an amount deducted from her parenting payment for over six months, she still had no letter or advice from Centrelink which informed her of the amount which was being deducted. She also again referred to the illness experienced by one of her children in 2004 and the potential for future expenditure, notwithstanding that a medical report indicates that the child has recovered. In conclusion, she stated that she did not know what she was reporting at the time of the reports she made during the debt period.
19. The respondent’s advocate argued on the balance of probabilities the Tribunal could not be satisfied that the applicant did not know that she was obliged to report gross earnings. He referred the Tribunal to consider whether the appropriate test was whether the applicant had actual knowledge or constructive knowledge, and referred the Tribunal to the following:
§Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435 at 445 (paragraph 48).
§Watts and Secretary, Department of Family and Community Services [2004] AATA 1398
§Vines v Djordjevitch (1955) 91 CLR 512
20. The respondent submitted that in the alternative, the appropriate question would be – Did the applicant know she was declaring net income?. He submitted further that the circumstances were such that the applicant was reporting amounts which were significantly less than one would expect net income to be when considering the gross amounts which have been reported (T18, folio 37). He referred particularly to the records of 28 January 2004 and 10 February 2004 where amounts of $583.00 and $593.00 (approximately) were reported for each of those fortnights when the gross amount was between $1,100.00 and $1,200.00. The respondent argued that a reasonable person with knowledge of the facts would know that the amounts being reported were under-reported even as net income.
Findings of Fact
(a)Mrs Kelly received the amounts of parenting payment alleged by Centrelink;
(b)Between 27 August 2003 and 8 February 2005 Mrs Kelly consistently under-reported the amounts of Mr Kelly’s earnings and that the basis of calculation of her parenting payment was therefore flawed;
(c)Mrs Kelly was over-paid parenting payment of $5,018.20 for 27 August 2003 to 8 February 2005;
(d)Mrs Kelly had not read information provided by Centrelink in letters to her, and particularly in relation to the requirement to report gross amounts earned;
(e)The applicant was a young mother with three children, one of whom had a serious health problem throughout part of the debt period.
Considerations
21. The Tribunal has taken into account all of the written and oral evidence available to the Tribunal in this matter.
22. Mrs Kelly acknowledged she did receive letters from Centrelink dated 20 October 2003, 13 January 2004 and 1 March 2004 but that she did not read some of the requirements about reporting earnings. In her circumstances at that time, where her husband was sometimes away with work, this magnified the difficulties for her. The Tribunal accepts that she did not have an awareness of what he sometimes earned and that what earnings she did report that they might have been obviously low in comparison to gross earnings. She did not seem to know her husband’s gross earnings and did not seem to have a sufficiently detailed concept of what might have been a reasonable amount of net earnings, even if she had know what his gross earnings were in particular fortnights.
23. I therefore find she did not have actual knowledge of many of the relevant facts. I accept that actual knowledge is the appropriate test of the applicant’s knowledge and state of mind when reporting amounts.
Issue 1 - Is the amount of $5,018.20 an overpayment?
24. The fact of the overpayment is not disputed by the applicant. The cause of the overpayment is in dispute. The dispute essentially is about the cause of the overpayment and Mrs Kelly queried why there were not periodic reviews. Her contention seems logical and reasonable. However, section 1068B prescribes the calculation method for parenting payment which she received and her legal obligations were put in letters to her on 20 October 2003, 13 January 2004 and 1 March 2004 (Exhibit 2). Centrelink could clearly have followed this pattern and informed her more regularly throughout the period. Nevertheless, Centrelink’s strict legal obligations were satisfied and Mrs Kelly’s obligations were not. She admitted she did not read these letters. Therefore, her admission of not having read the letters from Centrelink, and the fact that she acknowledges that she has been overpaid, makes the fact of the overpayment unchallenged and unchallengeable in this case. Therefore, there has been an overpayment to Mrs Kelly of parenting payment under section 1068B of the Social Security Act 1991 (the Act).
Issue 2 - Is the amount a debt due to the Commonwealth?
25. Section 1223(1) of the Act provides that where there has been an overpayment, and the person was not entitled “for any reason to obtain that benefit”, then the amount of the payment is a debt due to the Commonwealth.
26. The Secretary has submitted that the applicant received during this period, $5019.22 but was entitled only to $1.02. Therefore, the net overpayment of $5,018.20 in parenting payment is a debt due to the Commonwealth as contended by the respondent.
Issue 3 – Should the amount of the overpayment be recovered?
27. The overpayment must be recovered unless it can be demonstrated that the applicant’s circumstances comply with the requirements for write-off or waiver.
§ Write-off
28. Section 1236(1A)(b) provides that an applicant’s debt could be written off where the person has no capacity to repay the debt. Section 1236(1C) states that this provision cannot apply where the debtor can repay by means of deduction from Social Security payments, unless there would be severe financial hardship.
29. It is apparent section 1236 (1A)(b) has no application in this case. In respect of section 1236(1C), the applicant has been repaying the debt for many months which is understood to be $90 per fortnight by way of deductions from her social security payments. She stated that she had not received any correspondence from Centrelink about the amount of parenting payment or the amount of deduction for at least six months. The respondent undertook to have Centrelink to contact her and provide essential information which should have been provided to her. However, in view of the history of deduction to repay the debt, there appears to be no doubt as a matter of fact that the applicant has capacity to repay. Therefore, section 1236 is not satisfied and as a result, the debt cannot be written off under this section of the Act.
§ Waiver
30. Section 1237A of the Act provides that a debt must be waived where the whole or part of the debt is attributable solely to the administrative error of the Commonwealth. Also, even if that can be satisfied, it must also be shown that the debtor received the payments in good faith.
31. The respondent submitted that the purpose of this legislation is to ensure that there is fairness in the payment of benefits and that there should be adherence to the principle that taxpayers are entitled to expect that overpayments of public monies would be repaid (Department of Social Security and Hales (1998) 82 FCR 154 at 155). The facts in this case show that the error was caused by the applicant’s under-reporting her husband’s earnings. While this may not have been intentional, she was negligent in not reading the material provided and reporting appropriately. It cannot be said the payments received were received in good faith. The law is clear and her obligations to report gross earnings had been advised to her in advance. The amount of the debt may have been aggravated as Centrelink did not have any periodic review mechanism, but it was not the sole administrative error of the Commonwealth which caused the debt. That terminology has been held to mean that “…the only cause that objectively can be ascribed to the relevant debt is an administrative error”. (Sekhon v Secretary, Department of Family and Community Services (2003) FCAFC 190 per Selway J).
32. Therefore, while the applicant’s position as outlined in Exhibit 3 is tight, it is not unfair for her to repay the debt on the basis of the legal authorities above. Therefore, there is no ground to waive the debt under section 1237A.
§ Waiver in special circumstances
33. Section 1237AAD empowers the Secretary to waive all or part of a debt where there are special circumstances. In those cases, it was submitted that the Tribunal must be satisfied that “…the debt did not result wholly or partly from the debtor or another person knowingly….making a false statement or a false representation” (section 1237AAD (a)(i)).
34. The respondent submits that the applicant having declared her partner’s income at a lower rate than it actually was, has made those declarations falsely. The respondent has submitted that to make findings in the absence of evidence would be an error of law in relation to the application of this section (see Minister for Immigration and Multicultural Affairs v Rajamanikkam (2002) 210 CLR 222. The Tribunal has already found that the applicant has made incorrect reports about her husband’s earnings to Centrelink but that they were not done deliberately. Therefore, while her declarations were false, they were not done knowingly. In any event, the applicant did not read the correspondence forwarded to her by Centrelink although it was her responsibility to do so. Therefore, while she did not knowingly make false declarations, she undoubtedly did so negligently.
35. Even in those circumstances, the Tribunal must be satisfied that there are special circumstances to justify waiver. This requires that there must be circumstances which “…takes the case of out the ordinary” (Dranichnikov v Centrelink (2003) 75 ALD 134 at 148) (Groth v Department of Social Security (1995) 40 ALD 541 at 545 per Keifel J) also, special circumstances is intended to be “…a flexible response to the wide range of situations which could give rise to hardship or unfairness…” (Secretary, Department of Social Security v Hales (1998) 153 ALR 259 at 267 per French J).
36. The applicant in this case is like many such applicants - she and her family are in difficult circumstances particularly given they have three children dependent almost solely on her husband’s income and her parenting allowance. Nevertheless, that does not make her circumstances “special”. While it is regrettable that the debt was allowed to accumulate, the problem was not initiated by Centrelink. Therefore, the Tribunal finds that the facts do not reveal evidence to support a waiver of the debt in this case.
37. In the circumstances, the legal requirements for write off or waiver of the debt are not made out.
38. The Tribunal affirms the decision under review.
I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, Member
Signed: Jeff Mills
Legal Research Officer
Date/s of Hearing 7 June 2006
Date of Decision 5 July 2006
The Applicant self representedFor the Respondent Mr M Black, Department Advocate
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