Kesteven and Secretary, Department of Social Services (Social security) - [2023] ARTA 2

Kesteven and Secretary, Department of Social Services (Social security) [2023] ARTA 2 (13 March 2023)

Applicant: Mr Kesteven

Respondent: Secretary, Department of Social Services

Chief Executive Centrelink

Tribunal Number: 2024/B192134
Tribunal: General Member A Cichy
Place:Perth
Date:13 March 2023

Decision:The Tribunal affirms the decision under review.

Statement made on 13 March 2025 at 8:41am

CATCHWORDS

SOCIAL SECURITY – Austudy – student start-up loan debts – payment retrospectively cancelled – recovery of debt to the Commonwealth – waiver of the debts – sole administrative error – special circumstances – decision under review affirmed

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.

Statement of Reasons

This application relates to a decision by Services Australia (Centrelink) to raise and recover student start-up loan debts from Mr Kesteven.
Mr Kesteven was paid student start-up loans of $1,201 on 5 July 2023, $1,273 on 3 January 2024 and $1,273 on 3 July 2024 on the basis that he was a full-time student in receipt of austudy payment.
On 18 September 2024, an employee of Centrelink made a decision to raise debts in order to recover the student start-up loans on the basis that Mr Kesteven’s austudy payment was retrospectively cancelled from 25 May 2023 as his partner’s income precluded him from qualification to austudy and, thereby, from entitlement to the student start-up loans paid to him after that date.
Mr Kesteven requested an internal review of the decision and on 31 October 2024, an authorised review officer of Centrelink affirmed the decision under review.

By application received on 20 November 2024, Mr Kesteven asked this Tribunal to review the decision of the authorised review officer.
On 27 February 2025, the Tribunal conducted a hearing at which Mr Kesteven gave evidence by conference telephone. The Tribunal had before it the relevant documents from Mr Kesteven’s Centrelink file and computer records (150 pages) which had also been issued to Mr Kesteven, as well as Mr Kesteven’s Statement of Financial Circumstances (A1 to A6).

LEGISLATION AND ISSUES

The statutory provisions relevant to this review are contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act).
The issues which arise in this case are:
· Does Mr Kesteven owe a debt to the Commonwealth for the overpayment of student start-up loans? And, if so,
· Are there any grounds for a write off or waiver of recovery of part or all of the debt?

Does Mr Kesteven owe a debt to the Commonwealth for the overpayment of student start-up loans?

Mr Kesteven’s qualification for a student start-up loan was on the basis that he had been granted austudy for full-time study from 24 December 2020, pursuant to subsection 1061ZVBB(2) of the Act, which states as follows:
(1)A person is qualified for a student start-up loan for a qualification period if:

(a)  on the person's qualification test day for the period:
(i)  the person is qualified for austudy payment and austudy payment is payable to the person; and
(ii)  the person is receiving austudy payment and would be receiving austudy payment if steps 2 and 2A of the method statement in point 1067L - A1 of the Austudy Payment Rate Calculator were disregarded for the purposes of working out the person's rate of that payment; and
(iii)the person is qualified for austudy payment under section 568 in circumstances where subsection 569(1) (about qualifying study) applies and the relevant course of education is an approved scholarship course; and
(b)  the Secretary is satisfied that the person is not likely to receive the amount or value of a disqualifying education costs scholarship in the period of 6 months starting immediately after that qualification test day; and

(c) the person notifies the Secretary of the person's tax file number.

The Tribunal asked Mr Kesteven whether he disputed (or intended to dispute) whether he was qualified for austudy during the period in which he received the student start-up loans. Mr Kesteven confirmed that he did not intend to dispute that he was not qualified for austudy in the relevant period. The hearing therefore proceeded on this basis.
Under paragraph 1067L-D25(b) of the Act, if a person is receiving austudy, their partner has turned 22 years of age and is not receiving a social security payment, their partner’s income free area (for the purposes of the other person’s austudy payment) is the amount (rounded up to the nearest dollar) at which jobseeker payment would not be payable to the partner, were the partner qualified for jobseeker payment. As of 1 January 2023, that amount was $1,195.34. An amount earned by the partner above this amount is called a ‘partner income excess’ (section 1067L-D26) and section 1067L-D27 provides that this income excess creates an income reduction for the other person that is 60% of the person’s partner’s income excess.
The payslips provided for Mr Kesteven’s wife from 16 February 2023 indicate her gross pay in the period was always at least $3,211.24 per fortnight. Her ‘partner income excess’ was therefore at least $2,015.90 per fortnight. This income excess created an income reduction for Mr Kesteven of $1,209.54 per fortnight.
The method statement found in section 1067L-A1 of the Act provides, in brief, for the calculation of a maximum fortnightly rate of austudy, before which the income excess calculated for the person and the person’s partner are subtracted to provide the fortnightly rate of payment of austudy.
Under section 572 of the Act, an austudy payment is not payable to a person if the person’s austudy payment rate would be nil.
Having reviewed the payment schedule of austudy and cross-referenced with the payslips provided for Mr Kesteven’s wife from 16 February 2023, the Tribunal is satisfied that, had the necessary income reduction been applied to Mr Kesteven’s austudy payments in the period, his rate of pay would have been nil. The Tribunal is therefore satisfied that austudy was not payable to Mr Kesteven from 21 February 2023 (that is, the date from which he was partnered).[1]
[1] See paragraph 24
Under section 80 of the Administration Act, if the Secretary is satisfied that a social security payment has been paid to a person to whom the payment is not payable, the Secretary is to determine that the payment is to be cancelled or suspended. Whether the payment is cancelled or suspended is at the discretion of the Secretary, although the Tribunal notes the decision in Mentink v Secretary, Department of Social Services [2016] FCAFC 39, which preferences suspension of a payment over cancellation in circumstances where a person remains qualified for a payment although it is not payable to them. Nonetheless, the Tribunal notes the decision in Re Poyton and SDSS [2021] AATA 67, which noted that although suspension could continue indefinitely, this was not intended by the legislation and could ‘hardly be described as reasonable’ (at [60]). On balance, it is the Tribunal’s view that the Secretary’s exercise of discretion to retrospectively cancel Mr Kesteven’s austudy from 25 May 2023 was the preferable decision in circumstances where the payslips provided for Mr Kesteven’s wife covering the period February 2023 to January 2024 indicated a steady income that consistently caused the austudy payable to Mr Kesteven to be nil.
Under section 1223 of the Act, a person who receives a social security payment without the entitlement to that payment incurs a debt to the Commonwealth. A student start-up loan is included in the definition of a social security payment under section 23 of the Act. The Tribunal therefore finds that Mr Kesteven has incurred debts to the Commonwealth for student start-up loans of $1,201 (paid on 5 July 2023), $1,273 (paid on 3 January 2024) and $1,273 (paid on 3 July 2024).

Are there any grounds for a write off or waiver of recovery of part or all of the debt?

As articulated in Secretary, Department of Social Security v Hales [1998] FCA 219, in the ordinary course, the taxpayer is entitled to expect the refund of social security payments that have been made to a person who had no entitlement to them. Nonetheless, social security legislation contains particular provisions for the waiver or writing off of debts for the avoidance of outcomes that are unjust, harsh or oppressive. The relevant provisions of the Act in this matter are the waiver provisions of sections 1237A and 1237AAD and the write off provisions of section 1236. The Tribunal will consider each of these below.

Can all or part of the debt be waived pursuant to section 1237A of the Act?

The provisions in section 1237A of the Act require (under certain conditions) the waiver of all or part of a debt that is attributable solely to administrative error by the Commonwealth, if the debtor received the payment or payments in good faith. On the matter of solely, the Full Federal Court in Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190 said as follows (at [35]):
The ordinary or usual interpretation of the phrase ‘attributable solely to’ is that it refers to the single or sole cause of the relevant act or event. The word ‘attributable’ means ‘capable of being attributed’. It involves an objective assessment of causation. The words ‘a debt attributable solely to an administrative error’ can be paraphrased as meaning that the only cause that objectively can be ascribed to the relevant debt is an administrative error.
In his application to the Tribunal, Mr Kesteven wrote that he believed it was ‘manifestly unjust to be held accountable for a debt arising due to administrative delays’.[2] He also wrote that after settling into his new home with his wife (on 29 August 2023),[3] he made several attempts to update his details (including his address, marriage status, and authorised contact information) with Services Australia, and contended that the system had acknowledged his submission and indicated that they were pending approval, although he believed no action was taken, leaving his information unchanged.[4]
[2] Folio 14
[3] Folio 13
[4] Folio 14
The date at which Mr Kesteven changed his address with Centrelink must have been before 8 December 2023; a notice regarding his austudy payments was sent to this address on 8 December 2023.[5]
[5] Folio 129
Mr Kesteven told the Tribunal he had informed Centrelink that he was partnered in a claim for jobseeker payment that he submitted on 15 November 2023. Subsequently, and in support of this claim, Mr Kesteven submitted his wife’s payslips on 6 December 2023. He said that he believed that, despite having withdrawn the claim (according to his recollections) in December 2023, he believed that Centrelink had been provided with this information and acted upon it. In this regard, the Tribunal notes the decision in Josephson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 711, where an applicant provided information to Centrelink as part of an application that he subsequently withdrew, and the Tribunal’s finding that, notwithstanding the withdrawal of the the application, Centrelink should have used the information he had provided to ensure that another payment being made to him at the time was paid at the correct rate.
The Tribunal asked Mr Kesteven whether he had contacted Centrelink by phone at any time with regard to his marital status. He said that although he had attempted to phone Centrelink a number of times, the call queues were always very long and the phone would cut off while he was on hold, such that he was not able to speak to anyone.
The Tribunal notes that Mr Kesteven submitted a Mod P Partner Details form to Centrelink on 15 February 2024, which gave the date of his marriage as 21 February 2023.[6]
[6] Folio 67
Notices sent to Mr Kesteven on 1 February 2021,[7] 7 January 2022, 15 September 2023, 8 December 2023 and 24 January 2024 with respect to his austudy included a requirement (under ‘What you must tell us’) that he inform Centrelink should he become partnered and if his partner’s income changed.
[7] Folio 121
Mr Kesteven submitted that while he accepted that his late notification to Centrelink of his marriage had caused the loan of 5 July 2023 to be paid to him, the subsequent loans were a consequence of Centrelink’s failure to action the information that he had provided to the agency in a timely manner.
The Tribunal finds that the payment of a student start-up loan made to Mr Kesteven on 5 July 2023 was not made on the basis of sole administrative error; Mr Kesteven has accepted that his failure to notify Centrelink of his change in marital status contributed to this overpayment.
Having considered the evidence, the Tribunal disagrees with Mr Kesteven’s submissions with respect to sole administrative error. The reason that Mr Kesteven was entitled to the student start-up loans on 3 January 2024 and 3 July 2024 was that he remained entitled to austudy on those dates. Had Mr Kesteven notified Centrelink of his marriage shortly after 21 February 2023, Centrelink would have had the information before it to determine that he no longer qualified for austudy and, with it, for all the student start-up loans he was granted. Put another way, Mr Kesteven’s reporting failures preceded any potential administrative errors by Centrelink such that it would not be possible to say that the debt arose through administrative error to the exclusion of any contributory errors by My Kesteven. A waiver of the debts pursuant to section 1237A of the Act is therefore not possible.
In the alternative, should it be found that the Tribunal has erred in respect to its findings in paragraph 28 above, the Tribunal has also considered whether Mr Kesteven received the payments made to him in good faith. His evidence and submissions were to the effect that he did receive the payments in good faith because he was unaware that his wife’s income would preclude his entitlement to austudy (and thereby to the student start-up loans).
Mr Kesteven received a letter from Centrelink on 8 December 2023 about his austudy payments. This letter indicated that he could be paid up to $480 per fortnight before his income affected his austudy payments. It also provided (as did other notices sent by Centrelink previously to him) that he should tell Centrelink if he or his partner were to start or stop getting income, or their income changed. Mr Kesteven had submitted documents to Centrelink on 6 December 2023, showing his wife’s annual salary from 2 February 2023 was $83,013.[8]
[8] Folio 25
In Pledger v Secretary, Department of Family and Community Services [2002] FCA 1576 (Pledger) the Federal Court considered the question of whether a person, while not acting fraudulently, had received a social security payment in good faith. In considering the authorities on receipt in good faith, the Court commented as follows:
59. What seems to emerge from these authorities is that whether a payment has been received in good faith can only be determined after a careful consideration of the actual state of mind of the recipient of that payment. In that sense the test is entirely subjective, and not objective. However, plainly idiosyncratic views as to what might be regarded as acceptable behaviour, including the standards of a “Robin Hood”, will not be regarded as amounting to “good faith”. It should be noted, in this regard, that wilful blindness is itself a state of mind: Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 219-220.
Mr Kesteven did not dispute that he had received this (or any other notice in the hearing papers) from Centrelink. In his application to the Tribunal, he stated:

(a)In the process of finding a suitable rental etc., I apologise that I could not keep Centrelink informed in time. But as soon as I realised my error, I informed Centrelink in November 2024.[9]
(b)I trusted that these updates would be processed promptly once submitted. Despite diligently following the correct procedures, it has now been over a year and a half since I initiated these updates. Unfortunately, this prolonged delay have resulted in what Services Australia now refers to as a debt that I owe. In my mind, I humbly submit that this could easily have been avoided had my information been updated, as promptly as I notified them.[10]
(c)During this period, I continued to take steps to resolve the issue by resubmitting my information and seeking confirmation of the changes. Yet, no action was taken, and I received no communication regarding my submissions’ status. This lack of response has now placed me in a difficult position, with a dance that could have been prevented had the system duly processed my updates.[11]
[9] Folio 13
[10] Folio 14
[11] Folio 14

The Tribunal accepts that Mr Kesteven did not act fraudulently and made attempts to notify Centrelink of his marital status in November 2023. Nonetheless, the Tribunal does not accept that he received the payments of student start-up loan made to him after November 2023 in good faith on the basis that the notice he received from Centrelink on 8 December 2023 informed him of his maximum income before his austudy payment would be affected and that his partner’s income had the potential to affect his rate of payment. That Mr Kesteven either did not read this notice carefully or, having read the notice carefully did not question that he continued to receive austudy payments at the previous rate, indicates a level of wilful blindness that, per Pledger, constitutes a state of mind that does not lead the Tribunal to a finding of good faith receipt of payments made to him after November 2023.

Can all or part of the debt be waived pursuant to section 1237AAD of the Act?

Under section 1237AAD of the Act, recovery of all or part of a debt may be waived, as follows:
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 a false representation; or
(ii)  failing or omitting to comply with a provision of this Act, the Administration 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.
In order to consider a waiver under this provision, the Tribunal must be satisfied under paragraph 1237AAD(a) that Mr Kesteven did not knowingly make a false statement or fail to comply with the relevant legislation.
Mr Kesteven’s application to the Tribunal described the period from 14 February 2023 to 20 March 2024, including the beginning of his marriage, moving house on several occasions to be close to the hospitals where he was to work for his university placements, significant academic pressures and mental health struggles[12] that the Tribunal accepts as evidence that he did not knowingly fail to comply with provisions of the legislation or knowingly make false statements. Rather, it seems that the pressures associated with his studies and living situation meant that these failures were not made with actual knowledge. The Tribunal will therefore proceed to consider whether the circumstances are special circumstances within the meaning of paragraph 1237AAD(b) of the Act.
[12] Folio 13
The term ‘special circumstances’ is not defined in the Act. Nonetheless, the term has been considered on a number of occasions by the former Administrative Appeals Tribunal and the Federal Court of Australia. For circumstances to be special, the Court held in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 that they need not rise to the level of being exceptional circumstances but must have an element that makes them unusual or uncommon. Per Dranichnikov v Centrelink [2003] FCAFC 133 (at [66]), however, there must be something that distinguishes the case from other usual cases.

Mr Kesteven made the following submissions with respect to his circumstances:[13]

(a)He is presently unemployed and unable to apply for jobseeker because his wife’s income exceeds the eligibility threshold.
(b)He and his wife receive no additional financial support and are therefore entirely reliant upon her income to cover all their expenses.
(c)The necessity of moving twice in a year entailed unanticipated expenses and substantial debts.
[13] Folios 13 to 14

Mr Kesteven’s evidence to the Tribunal with respect to his circumstances was as follows:[14]

(a)He was unaware that his partner’s income would have caused him to cease to be qualified to receive austudy.
(b)He intended to pay back the student start-up loans upon gaining employment.
(c)He has taken a year off his studies for medical reasons and is currently looking for work. Although he has advertised himself as a [tutor], he does not yet have any students.
(d)Both he and his wife now live on a single income.
[14] Folios 13 to 14

Having considered Mr Kesteven’s circumstances the Tribunal does not find them to be markedly different or that distinguishes them from the circumstances of other social security recipients. The debt therefore cannot be waived pursuant to section 1237AAD of the Act.

Can the debt be written off pursuant to section 1236 of the Act?

Section 1236 provides for the temporary suspension of the recovery of a debt (called a ‘write off’) in particular circumstances as follows:
(a)the debt is irrecoverable at law (paragraph 1236(1A)(a));
(b)the debtor has no capacity to repay the debt (paragraph 1236(1A)(b));
(c)the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor (paragraph 1236(1A)(c)); or
(d)it is not cost effective for the Commonwealth to take action to recover the debt (paragraph 1236(1A)(d)).

Mr Kesteven’s whereabouts are known and it is cost effective for the Commonwealth to take action to recover the debt, such that it is not possible to write off the debt pursuant to either paragraph 1236(1A)(c) or 1236(1A)(d).
For the requirements of paragraph 1236(1A)(a) to be satisfied with respect to irrecoverability at law, pursuant to subsection 1236(1B), there must not be legal proof of the debt capable of sustaining legal proceedings, the debtor must be a discharged bankrupt and the debt must have occurred before their bankruptcy was declared or the debtor must have died and there be insufficient funds in their estate for its repayment. None of these conditions can be satisfied in this matter, precluding a write off of the debt pursuant to paragraph 1236(1A)(a).
For the requirements of 1236(1A)(b) to be satisfied with respect to a debtor not having the capacity to pay, it must not be possible to either make deductions against the debtor’s income tax refunds or future Centrelink payments made to the debtor.
In his application to the Tribunal, Mr Kesteven wrote that he is currently unemployed and, because his wife’s income exceeds the income eligibility threshold, does not qualify for jobseeker payment. As a consequence, he and his wife rely entirely on her income to cover all their household and living expenses, which places a significant strain upon them.[15]
[15] Folio 13
The Tribunal asked Mr Kesteven about the Statement of Financial Circumstances he submitted before the hearing. The statement was unsigned and undated and the Tribunal therefore confirmed with him that it was a complete and accurate statement. The Tribunal observed that the income received, in general, seemed sufficient to cover the expenses. Mr Kesteven confirmed that this was the case. Mr Kesteven told the Tribunal that he is paying off the Centrelink debt at a rate of $60 per fortnight with funds from his wife. The Tribunal therefore cannot write off the debt pursuant to section 1236 because Mr Kesteven does have the capacity to repay the debt through the funds he receives from his wife, without financial hardship.

DECISION
The Tribunal affirms the decision under review.

Date(s) of hearing:

Thursday, 27 February 2025