Lai and Secretary, Department of Social Services (Social services second review)

[2017] AATA 840

Lai and Secretary, Department of Social Services (Social services second review) [2017] AATA 840 (9 May 2017)

Division:GENERAL DIVISION

File Number:  2016/3793

Re:Shin-Yi Lai

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Senior Member Tavoularis

Date:9 May 2017

Date of written reasons:        13 June 2017

Place:Brisbane

The decision under review is affirmed.

.......................[sgd]…..........................

Senior Member T. Tavoularis

CATCHWORDS

SOCIAL SECURITY – RECOVERY OF DEBTS – Family Tax benefit – Childcare benefit – right to raise and recover debts – should debt be written off – whether there was administrative error by Department – whether there were special circumstances such that the debt be waived – debt was appropriately raised – no reason to write off or waive debt – decision under review is affirmed.

LEGISLATION

A New Tax System Family Assistance Act 1999 (Cth) (the “Family Assistance Act”);

A New Tax System Family Assistance Administration Act 1999 (Cth) (the “FA Administration Act”);

Social Security Administration Act 1991 (Cth) (the “SS Administration Act”); and

Evidence Act 1995 (Cth)

CASES

Re Lumsden and Secretary, Department of Social Security [1986] AATA 228

Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729

L and the Department of Social Security [1995] AATA 159

Secretary, Department of Family and Community Services and Birgden [2003] AAT 67

Beadle and Department of Social Security (1984) 6 ALD 1. In the case of Beadle, special

Groth and Secretary, Department of Social Security (1995) FCA 1708

Re Ivovic and Director General of Social Services (1981) 3 ALN 95

Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25

Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114

SECONDARY MATERIALS

Guide to Family Assistance Law

REASONS FOR DECISION

Senior Member Tavoularis

13 June 2017

BACKGROUND

NOTE: This application was jointly heard with that of the Applicant’s partner, Mr Kuoronny, comprising of AAT matter number 2016/3770.

1. Ms Shin-Yi Lai (the “Applicant”) is seeking review of a decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal (the “AAT1”) dated 1 July 2016.

2. That decision at AAT1 in turn affirmed a decision of the Department of Human Services (the “Department”) relating to the raising of four specific debts against the Applicant and the Department’s intention and action to recover those debts in full.

3. The total amount of those debts is approximately $5,000.00. The component parts of that debt are as follows:

   (a)The sum of $487.04 for child care benefit (“CCB”) paid for the period 1 October 2012 to 30 June 2013;

   (b)The sum of $759.00 for family tax benefit (“FTB”) paid for the period 29 September 2012 until 30 June 2013;

   (c)CCB payments totalling $1,179.72 for the totality of the 2013-2014 financial year; and

   (d)FTB payments totalling $2,518.50 for the totality of 2013-2014 financial year.

4. The application raises two substantive issues. Firstly, whether there are FTB and CCB debts that can be calculated by the Department and secondly whether those debts can be recovered as debts due to the Commonwealth.

5. The facts of the matter are adequately summarised in the respondent’s SFICs which appears as Exhibit 2 in the list of exhibits in this matter.

6. Specifically, those facts are summarised accurately at paragraphs 3 to 13 of those submissions.

7. Suffice it to say that on 20 July 2016, the applicant who did not agree or accept the decision made at AAT1 level of review, applied on 20 July 2016 to this Tribunal for review of the AAT1 decision.

   LEGAL FRAMEWORK

8. The law and policy as it relates to this decision is again summarised by the respondent and comprises five things: four pieces of legislation and one item of policy. The four pieces of legislation are:

   (a)A New Tax System (Family Assistance) Act 1999 (Cth) (the “Family Assistance Act”);

   (b)A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the “FA Administration Act”);

   (c)Social Security (Administration) Act 1991 (Cth) (the “SS Administration Act”); and

   (d)Evidence Act 1995 (Cth).

9. The relevant item of policy appears in the Guide to Family Assistance Law (the “Guide”).

   DECISION UNDER REVIEW

10. The Department refers to the authorised review officer’s (the “ARO”) amended decision dated 5 May 2016. Section 115(1) of the FA Administration Act allows for the variation or substitution of a decision after an application is made to AAT1 for review of a decision made by the Department. It deems that the decision under review is the varied or substituted decision.

11. The respondent contends that regardless of whether or not it had regard to the ARO decision made on 5 May 2016, the prevailing decision is that of the AAT1 on 1 July 2017. There is no further or actual purported review of that specific decision and it is that decision that we are reviewing as part of this application.

    ISSUES

    What right does the Department have to create debts or allege debts against recipients of benefits like FTB and CCB?

12. The right or capacity to raise these sorts of debts can be summarised in a series of sections from the legislation.

13. Section 58(1) of the Family Assistance Act provides that the annual rate of FTB must be calculated in accordance with the Rate Calculator in Schedule 1 to the Family Assistance Act. That schedule contains provisions that demonstrate the method for calculating a person’s FTB entitlement. Clause 38L of Schedule 1 says that where an individual or their partner is receiving a social security pension, or a social security benefit, or a pension, or an income support supplement, the individual’s income excess is nil and their income tested rate is the same as their maximum rate. When the pension or benefit paid to the individual or their partner is cancelled, the FTB is no longer payable free of the income test. Regard should also be had to Part 3, Division 1 of the FA Administration Act. The division sets out the eligibility criteria for someone to receive FTB. Further, Part 3, Division 4 of the FA Administration Act sets out the requirements for receiving the CCB. Schedule 2 of the Family Assistance Act shows how the CCB rate is calculated.

14. Section 105 of the FA Administration Act provides that the Department can review a person’s entitlement where it has sufficient reason to do so. The submission is made on behalf of the Respondent that the Department’s finding relating to her partner’s

    
    

    (Mr Kuoronny) Austudy payments on 22 June 2015, and in particular, the finding that the Austudy payment was cancelled from 29 September 2012, constitutes a sufficient reason to warrant the review of this applicant’s entitlement to FTB and CCB. I agree with that contention and endorse it accordingly.

15. A further submission is made on behalf of the Respondent that the Applicant’s FTB payments were correctly reconciled on the basis of her and Mr Kuoronny’s adjusted taxable incomes from 29 September 2012, rather than on the basis that Mr Kuoronny was in receipt of an income support payment. I also agree with that contention.

16. Finally, regard should also be had to sections 70 and 71 of the FA Administration Act because the combined effect of those sections is that where there are debts arising in respect of an overpayment of family assistance and CCB, they are debts that are due to the Commonwealth and recoverable by the Commonwealth.

17. We therefore arrive at the same questions in relation to the debt of this applicant as we did in relation to the matter of her partner, Mr Kuoronny.

    Is it possible for the applicant’s debt to be written off?

18. Section 95 of the FA Administration Act allows a debt to be written off in circumstances where it is irrecoverable at law, or the debtor has no capacity to repay it, or the debtor’s whereabouts are unknown, or if it is otherwise not cost effective for the Commonwealth to take action to recover it. For reasons I will state later in this decision, I do not consider that any of these elements of section 95 are met.

19. Further, section 95(4) says that where a debt is recoverable by way of social security reductions, a debtor is taken to have capacity to repay the debt, unless recovery by those means would result in the debtor being in severe financial hardship. The question arises: can the applicant have this debt written off on the basis of her demonstrating to the Tribunal that she is in severe financial hardship. I repeat the test in Re Lumsden and Secretary, Department of Social Security [1986] AATA 228. In that decision the Tribunal said it is necessary that for this term of severe financial hardship to be satisfied, a person’s entire financial position would need to be materially less than the current rate of pension. I repeat and rely on the comments made in the earlier decision of Mr Kuoronny as to the definition of severe financial hardship as that definition is discussed in the respective matters of Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729, L and the Department of Social Security [1995] AATA 159 and Secretary, Department of Family and Community Services and Birgden [2003] AAT 67.

20. The submission has been put to me by the Respondent that section 95 has no application in this matter. I agree. This debt is recoverable at law. It is not a question of recovery of the debt not being cost effective to the Commonwealth. I have no doubt that the applicant has a clear capacity to repay this total debt of approximately $5,000. This is already demonstrated by the fact that she has entered into a fortnightly repayment plan of $20 per fortnight. In the circumstances of the applicant, I consider it inappropriate to make any finding or order that all or part of this debt be written off for any period of time.

21. The next question is in relation to the waiver of the debt. The same two questions that came up in Mr Kuoronny’s matter emerge here.

    Is it possible for the applicant to point to some kind of administrative error by the Commonwealth in terms of how this debt has been raised?

22. Clearly the debtor, the Applicant, has received the payment in good faith. But she must also establish that she would suffer severe financial hardship if the debt, or any part of that debt, were not waived. I am not in a position, having heard the evidence in Mr Kuoronny’s case and perused the material in the Applicant’s case, to make any such finding.

23. The further point to note is that the existence of an administrative error of itself is not sufficient to meet the requirement of sole administrative error and the debt must arise by administrative error by the department to the exclusion of everything else.[1]

    [1] See A New Tax System (Family Assistance) (Administration) Act 1997, s 97.

24. The submission has been made that the Applicant’s receipt of FTB and CCB and the debts that arose as a result of that were not caused solely by an administrative error on behalf of the Respondent department. I agree. I find that rather those debts arose as a result of the Applicant’s partner’s Austudy payments being retrospectively reviewed and cancelled subsequent to the Applicant’s actual fortnightly income for the period 2 April 2011 to 19 June 2015 becoming known. The Applicant’s partner (Mr Kuoronny), failed to report the changes in the Applicant’s income to the Department for the purpose of assessing his entitlement to receive Austudy and associated payments, despite being appropriately notified of his obligations in that regard.

25. Given that Mr Kuoronny has materially contributed to the debts being raised, I agree that it cannot be said that those debts are attributable solely to the respondent Department’s actions on their own. Clearly there are other factors that contributed to these debts being raised against the Applicant.

26. The next question as to whether or not this debt can be waived is whether or not the Applicant can establish severe financial hardship should she be placed in the position of having to repay these debts.

27. My finding obviously is based on the same reasons given in Mr Kuoronny’s matter. The answer is “no”. Here, the applicant continues to work on a full-time basis as a registered nurse while the husband, on his own evidence, has work as a property manager.

28. They receive something in the order of $6,000 per month in gross earnings. They also receive $6,500 per annum for homestay services. They also receive net rental income of $378 per week in respect of an investment property either in the sole or joint names of Mr Kuoronny and the Applicant.

29. I repeat the numbers that I mentioned in Mr Kuoronny’s decision in relation to their financial position. There is an investment property, a townhouse, at Wishart which has a value of approximately $415,000. There is a mortgage to a first registered mortgagee in the sum of $265,000 and that loan is serviced on an interest only basis.

30. There is also evidence from Mr Kuoronny that he and the Applicant borrowed an additional amount of $85,000 from family and friends for assistance with the purchase of that property. That loan does not attract any interest.

31. Mr Kuoronny’s evidence in his matter, which can be reliably imported into this particular application, was also that there is a home at Mansfield that is owned jointly by the Applicant with Mr Kuoronny. The value of that house is $650,000 and it has a mortgage over it in the sum of $260,000 by way of first registered mortgage. That mortgage is serviced on an interest only basis. In addition to this, a loan of $405,000 was obtained by the couple, the Applicant and Mr Kuoronny, and that was to fund the purchase of the home. The loan was from Mr Pi I Su and it was provided in exchange for the Applicant and Mr Kuoronny providing a homestay service for that lender’s daughter for a period of five years. The total interest payable on that loan is the sum of $1 per annum. That is, $1 per annum for interest on a loan of $405,000 while the loan in itself is not repayable until 2020.

32. Having regard to this evidence, I think it is consistent with a finding that the Applicant and her partner are indeed in an advantageous financial position compared to most other social security recipients. They have a positive income flow and there can be no doubt that their assets exceed their liabilities.

33. In addition, they have a loan of $405,000 which does not attract any interest payment at all. In the totality of these circumstances, I do not find that the Applicant’s financial position is one of severe hardship that is required by section 97 and as such, the Tribunal cannot waive these debts pursuant to a severe financial hardship element via the operation of section 97 of the FA Administration Act.

    Does the Applicant have special circumstances such that the Respondent should waive the right to recover all or part of the debt?

34. The next question is whether the Applicant can demonstrate to the Tribunal that she has certain special circumstances such that may allow the Tribunal to make an order waiving the Respondent Department’s right to recover all or part of that debt.

35. “Special circumstances” is a unique concept because it does not have a definition in any of the relevant legislation. The interesting thing about financial hardship is that financial hardship alone is not enough to demonstrate that a waiver of a debt is desirable. It must also be shown that the debt did not result from knowingly making a false statement or representation, or failing or omitting to comply, with the relevant legislative position.

36. Given that “special circumstances” do not have a definition in the legislation; one has to have regard to what the authorities say on the point. The relevant authority is the matter of Beadle and Director-General of Social Services (1984) 6 ALD 1. In the case of Beadle, the Tribunal said:

    “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…”[2]

    [2] Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3 (Justice Toohey, Member Wilkins and Member Billings).

37. A similar test or definition was repeated in the additional authorities to which I was referred: Groth and Secretary, Department of Social Security [1995] FCA 1708, Ivovic and Director-General of Social Services [1981] AATA 57, Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25, and Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114.

38. I do not recall any evidence or any contention (other than relating to financial hardship) to the effect that this Applicant’s circumstances are otherwise out of the ordinary, unusual or uncommon. I do not think they are. Any waiver of this debt under subsection 101(1)(b) requires demonstration of special circumstances other than financial hardship alone.[3] Financial hardship alone is not enough for the purposes of convincing the Tribunal that the debt should be waived.

    [3] See A New Tax System (Family Assistance) (Administration) Act 1997, s 101.

39. I therefore agree with the submission that has been put on behalf of the Respondent Department that this Applicant’s circumstances are not sufficiently special to warrant an exercise of any discretion to waive all or part of the debt under section 101 of the FA Administration Act.

    CONCLUSION

40. Accordingly, I affirm the decision under review.

I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Senior Member Tavoularis

.........................[sgd]...........................

Associate

Dated: 13 June 2017

Date of hearing:	9 May 2017
Applicant:	In person for part, Otherwise represented by Mr T. Kuoronny
Solicitors for the Respondent:	Department of Human Services