Khamis and Department of Family and Community Services
[2005] AATA 1250
•16 December 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 1250
ADMINISTRATIVE APPEALS TRIBUNAL )
) N2005/957
GENERAL ADMINISTRATIVE DIVISION ) Re
MARIETTE KHAMIS
Applicant
And
DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Ms N Isenberg, Member Date 16 December 2005
Place Sydney
Decision The decision under review is set aside. In substitution for the decision
set aside the Tribunal decides that the Applicant does not owe a debt of
$4,394.00 for the 2003/2004 tax year.……………………………….
Ms N Isenberg
Member
CATCHWORDS
SOCIAL SECURITY – consideration of whether a debt of $4,394.00 is owed to the Commonwealth and whether the debt must be repaid – the meaning of “special circumstances” considered and assessed - the decision under review is set aside.
LEGISLATION
Social Security Act 1991 - 1223, 1237A and 1237AAD
A New Tax System (Family Assistance) (Administration) Act 1999
CASE LAW
Re Gerhardt and Department of Employment, Education and Training (AAT 10941, 17 May 1996)
Re De Neumann and Secretary, Department of Social Security (1996) 45 ALD 78
Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 132 ALR 127
Jazazievska v Secretary, Department of Family and Community Services [2000] FCA 1484
REASONS FOR DECISION
16 December 2005 Ms N Isenberg, Member DECISION UNDER REVIEW
1. The decision under review before the Administrative Appeals Tribunal (“the Tribunal") was the decision of the Respondent, the Secretary, Department of Family and Community Services ("Centrelink") dated 4 February 2005 as affirmed by the Authorised Review Officer (“ARO”) on 3 March 2005, and the Social Security Appeals Tribunal (“the SSAT") on 9 June 2005 to raise and recover a debt of $4,394.00 for the 2003/2004 tax year.
BACKGROUND
2. Most of the facts in the matter were not in dispute and the following findings of fact by way of background can be made.
3. In the 2003/04 tax year Mrs Khamis received Family Tax Benefit (“FTB”) by fortnightly installments for her children Luke and Monica for the full year and for her son John for part of the year.
4. Mrs Khamis elected to receive FTB Part A base rate during the year.
5. On 24 December 2004, following assessment of Mr and Mrs Khamis’ income tax returns by the Australian Taxation Office (“ATO”), Mrs Khamis' entitlement to FTB for 2003/04 was reconciled.
6. On 5 January 2005, a cheque in the sum of $4,394.00 was sent to Mrs Khamis’ address. On that day Centrelink sent a letter to Mrs Khamis advising that the top-up amount due to her for FTB in 2003/04 was $4,394.00. (T22/pp86-87)
7. On 6 January 2005 Mrs Khamis confirmed with Centrelink that payment should be directed to the same bank account as her regular FTB payments (T24/pp89-90, T25/p91).
8. On 10 January 2005 (T27/p93) Centrelink paid the FTB top-up payment of $4,394.00 into Mrs Khamis’ account (T25/p91).
9. Mrs Khamis did not contact Centrelink to query the duplicate payments.
ISSUES BEFORE THE TRIBUNAL
10. The following issues are before the Tribunal:
· Whether the applicant, Mrs Khamis, has a debt of Family Tax Benefit for the 2003/2004 financial year of $4,394.00?; and if so,
· Whether this debt is recoverable under the A New Tax System (Family Assistance) (Administration) Act 1999? (“the Administration Act”).
LEGISLATION
11. The relevant legislation in this matter is the Social Security Act 1991 (“the Act”) in particular sections 1223, 1237A and 1237AAD.
THE HEARING
12. A hearing was held before me on 17 November 2005 at which Mrs Khamis, who did not attend the hearing, was represented by her husband. Centrelink was represented by Ms P Sharma, an advocate from the Department of Family and Community Services.
13. I had before me documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which I took into evidence.
14. Mr Khamis gave evidence and was cross-examined on behalf of Centrelink. I also asked him questions.
CONSIDERATION OF EVIDENCE AND FINDINGS
15. In coming to the correct and preferable decision, I took into account all the evidence, submissions, case law and relevant legislation.
16. By way of background, Mr Khamis said that his wife had, in a previous year got into some difficulty in relation to overpayment of FTB by the overzealousness of their accountant, and so, from then on, elected to receive minimal regular FTB. It would be topped up at the end of the financial year if their entitlement was greater than had been paid. He said that Centrelink had told him that the only way to do this was to overstate taxable income so that, on its face, the family would be entitled to minimal FTB on a regular basis, until reconciled at the end of the tax year after lodgment of tax returns.
17. From early December 2004 he had been enquiring of Centrelink, on his wife’s behalf, about the top-up payment in relation to the previous financial year. He said he was referred to the ATO and then back to Centrelink. He was ‘bounced’ from one to the other. He gave clear evidence that each said it was the other’s responsibly to pay the top-up. He described it as a ‘tandem effort’.
18. In its Statement of Facts and Contentions, Centrelink described the process as follows:
“As part of the FTB reconciliation administrative arrangements between Centrelink and the ATO information is transmitted electronically. The reconciliation result transaction sent by Centrelink to the ATO on 24 December 2004 advised the reconciliation top-up amount was $4,394.00. The wash-up transaction from the ATO to Centrelink on 5 January 2005 advised that the ATO was not able to include the reconciliation result on Mrs Khamis Tax Notice of Assessment and the ATO did not issue the reconciliation top-up amount to Mrs Khamis. In these circumstances Centrelink issues the payment, but does not do so until after the wash-up transaction is received from the ATO. (T3/pp8-13)”
19. Mr Khamis’ evidence was that no details of any ‘reconciliation’ were ever received.
20. He was asked about the Centrelink file note of 30 December 2004 to the effect that he was told that the top-up amount was $4,394.00 (T19/pp76-77). He said he had numerous telephone conversations with Centrelink officers and was told Centrelink was not sure about the amount. He also had numerous discussions with the ATO. Both told him that a computer would have to work it out.
21. On 4 January 2005, according to Centrelink’s records, Mr Khamis contacted Centrelink and was again advised that the FTB top-up amount was $4,394.00. (T21/p85)
22. The cheque was to be delivered to Mrs Khamis on 7 January 2005. Mrs Khamis' records disclose that such payment was reissued on 6 January 2005. (T26/p92)
IS THERE A RECOVERABLE DEBT?
23. Centrelink contended that an overpayment of $4,394.00 has arisen because Mrs Khamis has been paid twice for the same entitlement: once into her bank account and once by cheque.
24. Section 71 of the New Tax System (Family Assistance) (Administration) Act 1999 provides as follows:
“A NEW TAX SYSTEM (FAMILY ASSISTANCE) (ADMINISTRATION) ACT 1999
- SECT 71
Debts arising in respect of family assistance other than child
care benefit and family tax benefit advanceNo entitlement to amount
(1) If:
(a) an amount has been paid to a person by way of family tax benefit, maternity payment or maternity immunisation allowance (the assistance) in respect of a period or event; and
(b) the person was not entitled to the assistance in respect of that period or event;
the amount so paid is a debt due to the Commonwealth by the person.
Overpayment
(2) If:
(a) an amount (the received amount) has been paid to a person by way of assistance; and
(b) the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;
the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.”
25. However it was not clear to me what was the true amount of FTB payable to Mrs Khamis. There was no evidence before me as to how the ‘reconciliation’ had occurred, only Centrelink’s statement as to quantum of her entitlement. I simply could not know if there is a debt to the Commonwealth on the basis of the evidence before me.
26. With a generosity which Centrelink does not deserve in my view, Mr Khamis conceded, (but still without the benefit of any evidence from Centrelink) “now that it has been explained to me” that the appropriate FTB was $4,394.00.
27. In that event I have proceeded on the basis that Mrs Khamis has in fact been paid twice for her top-up FTB, in which case there would be a debt to the Commonwealth.
SHOULD THE DEBT BE RECOVERED?
28. The Act makes provision in limited circumstances for debts not to be recovered and provides as follows:
“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.”
29. For a debt to be waived under section 1237A, two conditions must be met, namely that the debt arose solely because of administrative error and the debtor received the payments in good faith.
Was the debt solely attributable to an administrative error by Centrelink?
30. Centrelink conceded that it made an error in this case by issuing the duplicate payment, but contended that the debt in this case did not arise solely due to an administrative error by the Commonwealth.
31. Centrelink contended that the word “sole” should be given its ordinary meaning. In the Concise Oxford dictionary, “sole” is defined as “one and only, exclusive, alone, unaccompanied”. This approach was used by the Tribunal in Re Gerhardt and Department of Employment, Education and Training (AAT 10941, 17 May 1996) paragraph 40 , in which the Tribunal stated:
“There is nothing in sub-section 289(1) which indicates that any meaning should be given to “solely” other than its ordinary meaning. Applying those ordinary meanings to the sub-section mean that the Secretary must waive the right to recover the proportion of the debt that is attributable only to the Commonwealth’s administrative error. The Secretary’s duty to waive does not extend to those debts which are attributable to errors or other factors which are independent of the Commonwealth’s administrative error.
It makes no difference that those other errors or factors are minor. If those other errors or factors follow as a result of the Commonwealth’s administrative error (i.e. they are incidental to the Commonwealth’s error), then it may be that the debt is attributable solely to the Commonwealth’s administrative error. Whether it is or is not attributable in that situation to the Commonwealth’s administrative error will be a question of fact.”
32. This decision was referred to with approval in Re De Neumann and Secretary, Department of Social Security (1996) 45 ALD 787 paragraph 19. The Tribunal stated that “solely” in section 1237A(1) should be given its ordinary meaning (“only” or “to the exclusion of all else”).
33. Centrelink’s position was that Mrs Khamis contributed to the debt as she had been notified in advance of the amount of the top-up to be paid and asked that the payment be made into her bank account. This request was made prior to receipt of the cheque by Mrs Khamis. When the cheque was received Mrs Khamis failed to return it to Centrelink, but banked instead and retained the proceeds.
34. However, in my view, the error in paying Mrs Khamis twice was the Commonwealth’s alone. It is unclear if the cheque emanated from Centrelink or the ATO. Mr Khamis thought it was from the ATO. Centrelink’s advocate conceded that it may have had both ‘ATO’ and ‘Centrelink’ printed on it. Centrelink’s records are equivocal as to why the duplicate payment was made, but I am satisfied it was not though the fault of Mr or Mrs Khamis. Further, Centrelink had the opportunity to stop payment on the cheque but did not do so.
35. Having come to the view that the debt arose solely from an administrative error by Centrelink and/or the ATO, I turned to examine the issue of good faith.
Good faith
36. Centrelink contended that Mrs Khamis did not receive the overpayment made to her in good faith, in that Mrs Khamis knew or had reason to know that she would not be entitled to two FTB top-up payments of $4,394.00.
37. It relied on its note of 30 December 2004 (T19, 76-77) that Mr Khamis was advised by Centrelink that Mrs Khamis was entitled to a top-up of FTB of $4,394.00. This is not quite what is recorded. The note states:
“Txt:Partner contacted CC LATROBE on 30 Dec 2004 regarding FAO Estimate of Income Updated, Review of Entitlement, for Family Assistance Office. Information was obtained via Phone Call. Document created by FCV on 30 Dec 2004.
Contacted at 8:30 Rec No: 9488.
FTB/CCF Reconciliation result for 2003/2004.
CUS received topup of: $4394.
FTB A Sup included in calculation: YES.”
38. Centrelink also contended that on 4 January 2004 Mr Khamis had again contacted Centrelink to confirm the payment amount and he was informed that the amount payable was $4,394.00 (T21, 85). This is not what the note says at all. That note records that on 4 January 2004 he was told by Centrelink that it was still awaiting the ATO ‘wash up’.
39. On 5 January 2005 (T22, 86-87) Mrs Khamis was sent a letter advising that the amount of FTB payable was $4,394.00 but the letter would not have been received for at least a couple of days.
40. On 6 January 2005 Mrs Khamis contacted Centrelink and advised that she had not received the FTB payment and requested that it be issued into her bank account (T25, 91). This was done and $4,394.00 was paid into Mrs Khamis’ bank account by Centrelink (T27, 93).
41. I referred to Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 132 ALR 127 and Jazazievska v Secretary, Department of Family and Community Services [2000] FCA 1484. Those cases are authority for the proposition that payment cannot be said to be received in good faith where the recipient knows or has reason to know that he or she is not entitled to the payments received, or where the person turns a blind eye to circumstances which raise doubt as to the entitlement of a person to receive payments and the person refused to make reasonable inquiries where such doubt exists.
42. It is true that Mrs Khamis did not return the cheque for the same amount to Centrelink or confirm that she was entitled to the duplicate payment. However Mr Khamis’s clear evidence was that he was continually ‘bounced’ between Centrelink and the ATO and understood both agencies to be equally responsible for payment of the top-up. His evidence was that they had no idea as to the amount of top-up that would be paid, and had been at pains at the commencement of the financial year to avoid a situation of overpayment.
43. As such I accept Mrs Khamis received the payments in good faith.
Severe financial hardship
44. Notwithstanding that the debt was occasioned solely through the error of Commonwealth agencies and that duplicate payment was received in good faith by Mrs Khamis, I must be satisfied that to repay the debt would cause her severe financial hardship.
45. The Respondent’s Statement of Facts and Contentions provide as follows:
“4.17In Re Fenely and Secretary, Department of Family and Community Services [2003] AATA 496, Member Way stated that:
“Severe financial hardship is not defined in the Act. However, 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.”
4.18In Re Reynolds and Secretary, Department of Social Security (AAT No 2656, 2 May 1986), Deputy President Jennings considered the meaning of the phrase “severe financial hardship” and stated:
“In…[I]n the ordinary case ‘severe financial hardship’ is a condition that is more likely to be demonstrated by a person whose income is materially less than the current maximum pension.
The facts of this case demonstrate a joint income of at least $2,000 per annum more than the maximum pension and accordingly I cannot describe the present circumstances of the applicants as involving them in severe financial hardship.”
4.19Similar approaches were taken by Member Webb in Re Preston and Secretary, Department of Family and Community Services [2003] AATA 974 and Senior Member Kiosoglous in Re Secretary, Department of Family and Community Services and Birgden [2003] AATA 67.
4.20Mrs Khamis’ current estimated combined family income for FTB purposes is $60,000. In addition Mrs Khamis is paid FTB of $147.56 per fortnight of which $40.00 per fortnight is withheld on account of recovery of the debt. The Secretary contends that with this estimated level of family income it cannot be said that Mrs Khamis is in severe financial hardship.”
46. Mr Khamis said the family lives in a house presently valued at about $600,000. There is a mortgage of $300,000 which requires about $25,000 per annum in repayments. Their other necessary expenses for utilities is about $1500 per quarter.
47. They have five children, all of whom live at home. Two are still at school, and the family has been given fee relief in respect of the $100 per month fees. The other children are not financially independent, and contribute little, if anything, financially to the household.
48. It has been necessary for Mr Khamis’s sister to pay off some of their debts - $30,000. It is unclear if the loan is repayable.
49. Neither Mr nor Mrs Khamis is in good health and neither is likely to work again. Both suffer psychiatric problems. Also, Mr Khamis suffers significant orthopaedic problems especially in relation to his cervical and lumbar spine. He needs to see the psychiatrist weekly and the physiotherapist every week or fortnight. He takes extensive medication, which is costly - about $20 - $30 per week. The children’s health is generally good, although one child requires orthodontic surgery.
50. Mr Khamis’s income is his superannuation and totals about $45,000 gross per annum. He was medically retired. Mrs Khamis does not work.
51. On my calculations, from the gross income of $45,000, nearly $34,000 is taken up with mortgage, utilities, school fees and medication payments. Even if this were the net income, it is clear that a family of 5-7 is not going to be able to be clothed and fed on $10,000 a year. The family is, colloquially put, ‘going out backwards’.
52. It is true that there is house but there is already a substantial mortgage which cannot be financed on the family’s present resources. It is inappropriate to suggest that the family move to a more modest home, given the size of the family and that some of the children are being educated at local schools.
53. I find that to require repayment of the debt, brought about by the Commonwealth’s error, and received in good faith by Mrs Khamis would cause further severe financial hardship. I acknowledge that relief from this debt will not solve the family’s financial problems, but will release them from a further additional burden.
DECISION
54. The decision under review is set aside. In substitution for the decision set aside the Tribunal decides that the Applicant does not owe a debt of $4,394.00 for the 2003/2004 tax year.
I certify that the 54 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Member
Signed: Associate
Date of Hearing 7 November 2005
Date of Decision 16 December 2005
Representative for the Applicant Mr Khamis
Advocate for the Respondent Mr L Carter
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