Khadem and Secretary, Department of Social Services (Social services second review)
[2022] AATA 218
•16 February 2022
Khadem and Secretary, Department of Social Services (Social services second review) [2022] AATA 218 (16 February 2022)
Division:GENERAL DIVISION
File Number(s): 2021/3433
Re:Shamsad Khadem
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Mr S Evans, Member
Date:16 February 2022
Place:Sydney
The decision under review is affirmed.
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Mr S Evans, Member
CATCHWORDS
FAMILY ASSISTANCE AND SOCIAL SECURITY – Family tax benefit – whether the applicant and her husband faced special circumstances which prevented the lodgement of income tax returns before the requisite deadline – relevant legislation and cases considered – relevant material considered – decision under review affirmed.
LEGISLATION
A New Tax System (Family Assistance) Act 1999 (Cth)
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth)CASES
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Secretary, Department of Social Services and Galvin (Social services second review) [2017] AATA 1218
Secretary, Department of Social Services and Hollis (Social services second review) [2015] AATA 941REASONS FOR DECISION
Mr S Evans, Member
16 February 2022
The Applicant, Shamsad Khadem, was in receipt of Family Tax Benefit (‘FTB’) until 18 April 2019 when her FTB payments ceased as her income estimate was too high to receive further payments. In August 2020, following reconciliation by the Department of Social Services (‘the Agency’), Mrs Khadem was found to be entitled to a FTB top-up payment. However, owing to the late lodgement of her and her husband’s income tax returns (‘ITR’), the top-up was deemed not to be payable. Mrs Khadem contends that special circumstances exist such that the deadline for lodgement of the ITRs should be extended. The Secretary of the Department of Social Services (‘the Secretary’) does not agree. Mrs Khadem seeks review of the decision by the General Division of the Tribunal.
BACKGROUND
On 29 July 2020 Mrs Khadem and her partner both lodged ITRs with the Australian Taxation Office (‘ATO’). On 12 August 2020 the Agency reconciled Mrs Khadem’s FTB entitlements for the 2018/2019 financial year. The Agency calculated that she was entitled to receive FTB top-up payments in the amount of $2,870.51. However, the Agency determined that the amount was not payable because she and her partner had lodged their ITRs late and after 30 June 2020.
By letter dated 20 September 2020 Mrs Khadem wrote to the Agency giving reasons for late lodgement of the ITRs for the 2018/2019 financial year. She explained that she and her husband had been granted an extension of time for lodging their ITRs by the ATO. She also stated that had she known she was required to advise the Agency of the delay, she would have done so.
Mrs Khadem also explained that 2020 had been challenging and difficult for her and her partner. She wrote in part:
… it has not been a great time in our personal and professional lives lately. In the recent years, I have lost both my father and father in law in the space of just 9 days. This has resulted in the main earner of the family, my partner losing his jobs as he has been doing casual jobs only. Following returns from overseas, our elder son had severe typhoid (Salmonella) resulting in mostly staying in hospital. In between, my partner has been jobless most of the periods. I was not working most of the time. Our debts have continued to pile up.
Then appeared COVID – 19. Ill time never wished to leave us at all. Some closed family members including my sister in law (my partner’s only brother’s wife) was infected with this deadliest virus in the UK suffering for a long time. Some closed people even passed away. We as family could not come back to our normal life. Due to uncertainty in the job market, we both lost hours. We had to request for freezing mortgage for a number of months. It is still on a freeze. Although income has been very minimal, all other essential bills have had to be paid on time. As a result, our credit cards have been impacted. Now, we have a credit card debt of close to $90,000.
Our lucks have not been great for permanent jobs. So, we both have been doing some casual work having very inconsistent income lately. If we get some income this week, there is no guarantee we will get the same or more in the next month or even next week. Some weeks, we even earn nothing. On the top, there are always worries about losing jobs.
[Errors in original]
On 15 December 2020 an Authorised Review Officer (‘ARO’) at the Agency affirmed the decision not to pay FTB top-up payments for the 2018/2019 financial year because the ITRs were lodged after 30 June 2020.
Mrs Khadem appealed the decision to the Social Services and Child Support Division of the Tribunal (‘AAT1’), which affirmed the ARO’s decision on 21 April 2021.
LEGISLATION
The applicable legislation is to be found in:
·A New Tax System (Family Assistance) Act 1999 (Cth) (‘the FA Act’);
·A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (‘the FA Administration Act’).
A person is eligible for FTB if they have an FTB child in their care and is an Australian resident. A person’s rate of FTB is calculated by applying the Rate Calculator contained in section 58 of the FA Act. The calculation requires a person and their partner’s combined Adjusted Taxable Income to be taken into account when calculating the person’s rate of payment.
Reconciliation is the process of determining a person’s eligibility for FTB and other payments. It also determines a person’s correct rate of payment for the relevant income year. The reconciliation time is the time after the end of the financial year when the person notifies of their Adjusted Taxable Income for the financial year. The time may be extended if there are special circumstances that prevented the person from notifying before the end of the first financial year.
Once the Agency has been notified of actual income by way of the income tax returns, the reconciliation process will determine the actual rate of FTB which was payable. Where the income estimate was higher than the actual income, a person may be entitled to a supplementary payment of FTB.
Section 28 of the FA Administration Act deals with the situation where a person and their partner do not lodge their ITRs on time. It provides that if ITRs are not lodged within the financial year after the financial year for which they have been paid, the Agency will consider the person as having no entitlement to FTB for that financial year. If the person subsequently lodges a tax return, the Agency recalculates their FTB entitlement.
Sections 32C and 32D of the FA Administration Act apply where a person is a member of a couple and is required to lodge income tax returns. In the present circumstances, Mrs Khadem and Mr Khadem were required to lodge income tax returns for the 2018/2019 financial year before the end of the following income year, being before 30 June 2020.
It is not in dispute that they did not do so, instead lodging their ITR’s for the 2018/2019 income year on 29 July 2020. The Secretary correctly identifies that this date is after the end of the first income year after the relevant income year, and before the end of the second income year after the relevant year.
In order for Mrs Khadem and her husband to receive the full FTB entitlement based on their actual combined taxable income, they are required to satisfy sections 32C and 32D of the FA Administration Act respectively.
Paragraphs 32C(3)(b) and 32D(2)(b) of the FA Administration Act provide that the reconciliation time may be extended for a further period as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the first individual and their partner from lodging their returns before the end of the first income year.
ISSUE
The question for the Tribunal is whether there were special circumstances which prevented Mrs Khadem and Mr Khadem from lodging their ITRs before the end of the next financial year, being 30 June 2020 (‘the due date’).
CONSIDERATION
In written statements, expanded on during the course of the hearing, Mrs Khadem outlined her and her husband’s circumstances throughout 2020 which contributed to the late lodgement of their ITRs. They can be relevantly summarised to include:
·In December 2019 both Mrs Khadem and Mr Khadem lost their fathers within nine days of each other and they were required to go overseas between 27 December 2012 and 1 February 2020;
·when they returned from overseas their son contracted salmonella;
·family members in the United Kingdom were infected with Covid-19;
·in April 2020 Mrs Khadem lost her job and the following month Mr Khadem lost his second job, having lost his first job in January that year;
·Mrs Khadem was experiencing a health issue for which she was receiving medical treatment which included blood transfusions and brief periods of hospitalisation.
Mrs Khadem contends that on or around 6 June 2020 Mr Khadem contacted the ATO to seek an extension on the lodgement of the ITRs for the 2018/2019 financial year. There is no documentary evidence that an extension of time to lodge the ITRs was granted andMrs Khadem does not indicate until when the extension was granted. However, Mr Khadem submits that he was not penalised when he lodged his tax return, and this should be accepted as evidence he was granted additional time in which to lodge his tax return.
The AAT1 decision records that Mr Khadem gave evidence he was unaware that he and Mrs Khadem were required to notify the Agency of their intention to lodge the ITRs after the due date. He contends that as he was granted an extension by the ATO to lodge his ITR late, he understood that the information would be shared between the ATO and the Agency, and that the extension granted by the ATO would also apply to the Agency. The Secretary submits that this assumption was erroneous.
In considering whether special circumstances apply, it is appropriate to consider the context in which this assumption was made.
On 24 March 2020 the Agency issued a notice advising Mrs Khadem that in order to receive her full FTB entitlement, she and her partner were required to lodge their 2018/2019 income tax returns or to advise if she and her partner were not required to lodge ITRs, by 30 June 2020. If this did not occur, she would not be entitled to any further FTB payments for the 2018/2019 financial year and be liable for a FTB debt for that year. The letter stated in part:
You need to confirm your family income for the 2018-19 financial year. To do this you and your partner need to lodge your tax returns or you need to tell us you are not required to lodge, by 30 June 2020.
If you and your partner do not do this, you will have to pay back any Family Tax Benefit paid for the 2018-19 financial year.
You may get top ups and supplement payments if your family income is confirmed by 30 June 2020.
…
Family Tax Benefit Part A and Part B supplements
The Family Tax Benefit Part A and Part B supplement payments are available after the end of the financial year once your payments have been balanced. Payment of the supplements are dependent on you (and/or your partner) lodging your tax returns or telling us that you (and/or your partner) are not required to lodge a tax return within 12 months after the end of the relevant financial year. An income limit of $80,000 or less also applies to receive the Family Tax Benefit Part A supplement. For information on the Family Tax Benefit Part A and Part B supplement rates, please go to humanservices.gov.au/ftb
The Family Tax Benefit Part A and Part B supplements may be used to offset overpayments.
Your payments may stop
If you do not confirm your family income, you may receive a debt. If you receive Family Tax Benefit fortnightly, your payments may also stop as a result. This can occur for any financial year where you (and/or your partner) do not lodge your tax returns or tell us you were not required to lodge.
On 8 May 2020 Mrs Khadem called the Agency and advised that her and Mr Khadem’s ITRs would be completed by the end of May.
In cross-examination Mrs Khadem was presented with an email sent by the Agency on 29 May 2020. The email was an urgent reminder that she and her partner needed to lodge their 2018-2019 tax returns or tell the Agency that they are not required to lodge one by 30 June 2020. She conceded that she would have received the correspondence. Though she was ill at that time, she expected Mr Khadem would have dealt with the correspondence on her behalf.
Further correspondence was sent by the Agency on 12 June 2020 reminding Mrs Khadem that she needed to confirm her ‘2018-2019 family income’ and that it was an urgent reminder to ‘act now or you may have to pay money back’. It further stated ‘[o]ur records show that you and your partner still need to lodge your 2018-2019 tax returns or tell us you are not required to lodge one by 30 June 2020’.
On the basis of the three reminders clearly setting out that she and her husband needed to submit their ITRs, that they needed to do so by 30 June 2020 and that if they did not do so it may be financially detrimental, I am satisfied that Mrs Khadem was aware of the due date for submitting her and Mr Khadem’s ITRs and the consequences of not doing so.
I accept the Secretary’s argument that Mr Khadem’s assumption that the extension of time provided by the ATO would apply to the submission of his ITRs to the Agency, and the deadline extension would be communicated to the Agency, was erroneous. Mr Khadem records that on 8 June 2020 he contacted the ATO and gave an update on he and Mrs Khadem’s ITRs. Importantly, the reminder sent by the Agency on 12 June 2020 – after the extension had been granted by the ATO – specifically stated that the Agency’s records showed that Mrs Khadem needed to lodge by 30 June 2020. By any reading, this correspondence would suggest that the ATO had not shared the information regarding the deadline extension with the Agency, or if it had done so, the Agency still required the ITRs be submitted by 30 June 2020 for the purposes of the FTB reconciliation.
Having made these findings, I now turn to considering whether there were special circumstances such that the discretion provided in paragraphs 32C(3)(b) and 32D(2)(b) of the FA Administration Act may be exercised.
The term ‘special circumstances’ is not defined in the relevant legislation and the Secretary directs the Tribunal to the decision in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 where this Tribunal stated:
An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. 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 usual 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.
In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 the Federal Court emphasised that it is not the intention of Parliament that the exercise of the discretion be confined to the ‘exceptional’ case, but rather that there is something that distinguishes the case from the ordinary or usual case. Further, for special circumstances to exist there must be some factors which distinguish the case and set it apart from other similar cases.
In the current matter it is not enough that there were special circumstances, those circumstances must also have prevented lodgement of the ITRs before 30 June 2020. In the matter of Secretary, Department of Social Services and Hollis (Social services second review) [2015] AATA 941 the Tribunal determined that it ‘must be satisfied of two things: first, that circumstances existed that were special, and secondly, that those circumstances prevented the claimant from making her claim within time’.
Whilst Mrs Khadem has made the case for she and Mr Khadem experiencing a difficult and stressful period, there is a dearth of evidence that indicates they were prevented from submitting their ITRs by the due date. The difficulties that they experienced as a result of the pandemic were no doubt unfortunate and stressful, but it is not clear how the loss of their employment at the beginning of 2020 prevented the lodgement of the ITRs by the due date.
Without seeking to diminish the difficulties that Mrs Khadem and her husband experienced, I am not satisfied that the circumstances prevented the submission of the ITRs. They may have caused delay and made the process of lodgement more onerous in the context of the heath and other challenges that were being experienced, but the evidence does not support a conclusion that the circumstances prevented them from meeting a due date which was a full year after the end of the financial year to which they related.
In Secretary, Department of Social Services and Galvin (Social services second review) [2017] AATA 1218 (‘Galvin’) the Tribunal similarly considered the exercise of the discretion in paragraph 32C(3)(b) and observed:
The Tribunal is minded to accept that the particular run of circumstances that Mr and Mrs Galvin faced in the 2014/2015 financial year were, cumulatively, uncommon. Juggling the needs of small children in a family is not uncommon or unusual, nor is the care of an elderly parent or grandparent - that is what family members do. And, sadly, the death of a close family member is something that we all have faced, or will face. But when one puts these matters together, and adds to them a sudden injury to another close family member on the other side of the world, it is, to borrow the words used by Senior Member Britten-Jones in Secretary, Department of Social Services and Willersdorf [2016] AATA 535 (Willersdorf), at [62], something of “a perfect storm”.
However the second part of the legislative test that the Tribunal must also consider is whether that unusual or uncommon combination of events prevented Mrs and Mr Galvin lodging their tax returns. Mrs Galvin said in her evidence that her usual practice was to lodge her returns for a financial year “by August” following the end of the financial year in question. She said she had been doing the books for the farm and her husband's business for some thirteen years. At that time in 2014 she would have been preoccupied with the serious terminal illness of her mother, but the other cited circumstances that were to come to pass had not yet eventuated. Her grandmother had not taken ill and her father-in-law had not had his fall.
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The Tribunal's conclusion is that the requirements in section 32C of the Administration Act are not met. Special circumstances did not apply which prevented the lodgement of the 2013-2014 tax returns of Mr and Mrs Galvin by 30 June 2015.
There are parallels between the circumstances outlined in Galvin and those of Mrs Khadem, in so much as they combined to create a perfect storm of difficulties. However, as in Galvin, for the discretion in section 32C (and in section 32D in this case) to be exercised, special circumstances must exist and they must have prevented the lodgement of the ITRs.
In considering the evidence I am not satisfied that special circumstances existed such that the first part of the requirement is met. The circumstances were unfortunate and doubtless stressful, but they were not unusual or out of the ordinary such that they would be described as special.
Were special circumstances to have existed, the evidence supports a finding that the lodgement of the ITRs competed with other pressing priorities. It does not, however, support a finding that Mrs Khadem and her husband were prevented from lodging the ITRs.
For these reasons, I find that the requirements in sections 32C and 32D of the Administration Act are not met, there are no grounds for extending the deadline for reconciliation and the decision under review will be affirmed.
I acknowledge that Mrs Khadem will be disappointed by the decision given the circumstances. Nonetheless, the decision not to make the FTB top-up payments for the 2018/2019 financial year was the correct decision.
DECISION
For the reasons stated above, the decision of the AAT1 dated 21 April 2021 is affirmed.
I certify that the preceding 39 (thirty-nine) paragraphs are a true copy of the reasons for the decision herein of Mr S Evans, Member
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Associate
Dated: 16 February 2022
Date(s) of hearing: 15 December 2021 Advocate for the Applicant: Mr A Khadem Solicitor for the Respondent: Mr G Lozynsky, Services Australia
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