KYLIE BOVILL and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2009] AATA 860

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 860

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/2225

GENERAL ADMINISTRATIVE DIVISION		)
Re		KYLIE BOVILL

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Dr M Denovan, Member

Date9 November 2009

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

...............[Sgd]...............................

Member

CATCHWORDS

SOCIAL SECURITY – Family Tax Benefit lump sum – Overpayment – Applicant has capacity to repay debt – Debt not attributable solely to administrative error made by Commonwealth – No severe financial hardship – No special circumstances – Secretary may not write off debt – Secretary may not waive debt – Decision under review affirmed.

A New Tax System (Family Assistance) (Administration) Act 1999 (Cth), ss 95, 97, 101

Dranichnikov v Centrelink (2003) 75 ALD 134

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Re Feneley and Secretary, Department of Family and Community Services (2003) 74 ALD 585

REASONS FOR DECISION

9 November 2009 Dr M Denovan, Member    

INTRODUCTION

1.      Mrs Kylie Bovill was paid a family tax benefit lump sum of $6,829.15 for the 2006–07 financial year.  I have to decide whether she was paid more than she was entitled to and, if so, whether the excess should be recovered.

BACKGROUND

2.      Mrs Bovill was partnered to her husband Mr Jason Bovill for the full financial year of 1 July 2006 to 30 June 2007.  She indicated this when she lodged her tax return for that financial year by e-tax.  Mrs Bovill claimed a family tax benefit lump sum as part of that tax return.

3.      On 20 September 2007, Mrs Bovill was paid a $6,829.15 family tax benefit lump sum.

4.      By letter dated 14 August 2008, Centrelink advised Mrs Bovill that the entire lump sum of $6,829.15 was an overpayment.  Centrelink determined that the overpayment had occurred because the income of Mrs Bovill’s husband had not been taken into consideration.

5.      That decision was reviewed and affirmed by an authorised review officer on 11 February 2009 and by the Social Security Appeals Tribunal on 19 March 2009.  An application for review was lodged at the Administrative Appeals Tribunal on 20 May 2009.

ISSUE

6.      

It is not in dispute that Mrs Bovill was overpaid family tax benefit for the

2006–07 financial year in the amount of $6,829.15, and that as a result she has a debt to the Commonwealth.  The issue is whether that debt should be recovered.

LEGISLATION

7.      The relevant legislation is the A New Tax System (Family Assistance) (Administration) Act 1999 (“the Act”).

8. There are two mechanisms available under the Act that permit a debt of family tax benefit not to be recovered: write off and waiver.

9. Section 95(2) of the Act provides the criteria under which a determination can be made to write off a debt. This section provides that a debt can be written off if, relevantly:

(a)      the debt is irrecoverable at law; or

(b)      the debtor has no capacity to repay the debt.

10. Section 95(4) of the Act provides that a person is taken to have capacity to repay the debt unless recovery would cause the person severe financial hardship.

11. Section 97 of the Act requires the Secretary to waive that part of the debt that is attributable solely to administrative error. However, the provision continues, the Secretary must only do so if the debtor received the payment in good faith and if the debtor would suffer severe financial hardship were the debt not to be waived.

12. Section 101 of the Act provides an alternative way that a debt can be waived; that is, if special circumstances exist.

APPLICANT’S EVIDENCE AND SUBMISSIONS

13.     Mrs Bovill told the Tribunal that 2006–07 was the first financial year that she completed her tax return using the e-tax programme.  Previously, she had engaged the services of a professional accountant.

14.     Mrs Bovill thought she had completed the e-tax return correctly.  She stated at the hearing that she had provided information about her husband and his income.  When Mrs Bovill received a cheque for $6,829.15, she initially thought there was a mistake.  She did not immediately spend the money but made several enquires to find out whether she was really entitled to the money.  After making phone calls to both the Australian Taxation Office (“ATO”) and Centrelink, she was told the amount of money was high because it included back payments.  Mrs Bovill was finally convinced that she was entitled to the money.

15.     Mrs Bovill again lodged her tax return using e-tax for the 2007–08 financial year.  When she received a cheque in excess of $10,000, she was sure something was wrong.  She telephoned Centrelink and was told that she was entitled to neither the 2007–08 payment nor the 2006–07 payment.  Mrs Bovill repaid some money in relation to the 2007–08 payment (this repayment was, however, credited to the earlier overpayment).  Mrs Bovill states that she has already spent the money received in 2007 on her daughter’s uniform and education expenses.

16.     Mrs Bovill acknowledges that errors she made in completing her tax returns online contributed in part to her overpayment of family tax benefit.  However, she does not accept full responsibility for the mistake.  She says that Centrelink recorded that she was partnered and, therefore, she should not have been paid family tax benefit at the single rate.  Mrs Bovill further contends that she continued to do the right thing by raising the possibility of a mistake with both the ATO and Centrelink.  Both agencies erred when they reassured her that she was entitled to the money.  Mrs Bovill now finds herself in a stressful situation, in spite of her best efforts to have the validity of her payment checked prior to spending the money.

17.     Mrs Bovill works full-time in the fitness industry.  She earns about $34,000 per annum.  Her husband is a production manager, and has recently had his income reduced from approximately $83,000 per annum to approximately $65,000 per annum.

18.     Mrs Bovill pays her daughter’s education expenses and family’s household expenses.  Her husband pays the mortgage and other regular repayments.  Mrs Bovill believes the mortgage on the family home is about $300,000 and says that the family lives from week to week.  She acknowledged that her financial situation was not desperate, but said that it was “stressed”.

CONSIDERATION

Can the debt be written off?

19.     Mrs Bovill has fully repaid the debt of $6,829.15.  She still has an outstanding debt for the 2007–08 financial year overpayment.

20.     Mrs Bovill’s combined family income is in the vicinity of $100,000 per annum.  I agree with the Secretary’s contention that the debt is recoverable because Mrs Bovill is not in severe financial hardship: she is employed and capable of making repayments towards the debt. 

21. Mrs Bovill admits that she does not suffer financial hardship. However, she claims that she does suffer from financial stress because her family lives from week to week. In addition to general household and other expenses, Mrs Bovill and her husband have mortgage commitments, maintain two vehicles, and pay private school fees and dancing lessons for their daughter. 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 that Mrs Bovill has capacity to repay the debt. Consequently, Mrs Bovill’s debt cannot be written off under s 95 of the Act.

Can the debt be waived?

22. For a debt to be waived under s 97 of the Act, the debt must be due solely to administrative error and the payments must have been received in good faith.

23.     I regarded Mrs Bovill as a credible witness who was prepared to admit to any errors she may have made.  She gave evidence in a straightforward and honest manner.  I accept that at all times she thought she was being honest and at no time did she attempt to procure a benefit to which she did not believe she was entitled.  The respondent accepts that Mrs Bovill received the overpayment in good faith;  I agree.  Mrs Bovill made several attempts to ensure that the money she had been paid was truly hers and not due to error.  Unfortunately, some time lapsed before the mistake that caused the overpayment was identified and a debt raised.

24.     Although there was a delay in the identification of the overpayment, the debt is attributable, at least in part, to the fact that Mrs Bovill did not provide sufficient details of her husband’s income when applying for the family tax benefit lump sum.

25.     There are of course difficulties for many people in accurately completing documents such as tax returns and applications for family tax benefit online.  Mrs Bovill has been told that she was not the only person to experience difficulties, and to prevent future problems it will no longer be possible to apply for a lump sum family benefit when completing an online tax return.

26. These difficulties and the resultant error in estimating the lump sum are the result of Mrs Bovill’s personal situation and are not related to administrative error on the Commonwealth’s behalf. As I am satisfied that no proportion of the debt is solely due to an administrative error made by the Commonwealth, I find that the discretion contained in s 97 of the Act cannot be applied.

27. In making this finding I am mindful that even if all or a proportion of the debt can be attributed solely to an administrative error made by the Commonwealth, for s 97(1) of the Act to apply Mrs Bovill would have to demonstrate that she would suffer severe financial hardship if the debt were not waived.

28. The meaning of severe financial hardship has not been defined in the Act. Its meaning was addressed in the decision of Re Feneley and Secretary, Department of Family and Community Services,[1] which noted that the meaning of the term:

… while not implying destitution goes beyond straitened financial circumstances and imports a need for the particular circumstances of a person to include suffering of a severe or extreme nature.

[1] (2003) 74 ALD 585 at 587.

29.     Mrs Bovill accepts that her financial circumstances are not of this nature.  I am satisfied that it cannot be said that Mrs Bovill would suffer severe financial hardship if her debt were not waived.

30. Next, I must consider waiver in special circumstances provided for by s 101 of the Act. Mrs Bovill states that she found herself under special circumstances because she was honest at all times, and attempted several times to have the situation clarified. She only spent the money in question because she was erroneously convinced by the ATO and Centrelink that the money was hers.

31. Whilst special circumstances are not defined in the Act, the approach to be taken in the interpretation and application of discretionary provisions has been dealt with by the Tribunal and the Federal Court in numerous circumstances.

32.     In Re Beadle and Director-General of Social Security[2] it was said that:

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.

[2] (1984) 6 ALD 1 at 3.

33.     In Dranichnikov v Centrelink,[3] the Full Federal Court observed that when considering the meaning of special circumstances:

… 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 …

[3] (2003) 75 ALD 134 at 148 [66].

34.     Mrs Bovill is currently employed full-time, as is her husband.  The mortgage on their family home is large but not exceptionally so.  They are only supporting one child.  I am satisfied that Mrs Bovill’s circumstances are such that her case is not out of the ordinary.  It is not possible to justify a finding of special circumstances.

35. I am also satisfied that there are no other circumstances in this case which are so unusual, uncommon or exceptional as to justify a finding of special circumstances. That being so, I find that it is not possible to exercise the discretion to waive Mrs Bovill’s debt pursuant to s 101 of the Act.

36. The debt due to the Commonwealth cannot be written off or waived under the discretionary provisions of the Act, and so I affirm the decision under review.

I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Dr M Denovan, Member.

Signed:.........................[Sgd].....................................................
              Mátyás Kochárdy, Research Associate

Date of Hearing  15 October 2009
Date of Decision  9 November 2009
The Applicant was self-represented
Advocate for the Respondent   Mr R McQuinlan