Llewellyn and Secretary, Department of Families, Community Services and Indigenous Affairs

[2007] AATA 1997

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1997

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/0952

GENERAL ADMINISTRATIVE DIVISION		)
Re		ANTHEA GAIL LLEWELLYN

Applicant

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

Respondent

DECISION

Tribunal Senior Member L Hastwell

Date30 November 2007

PlaceAdelaide

Decision The Tribunal affirms the decision under review.

..............................................

L HASTWELL
  (Senior Member)

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances - Family Tax Benefit – debt recovery from arrears of Family Allowance – top-up payments once annual reconciliation complete – supplement – arrears – can supplement be used to set off debt of FTB from previous years – meaning of arrears – supplement intended as payment in arrears – decision affirmed

A New Tax System (Family Assistance) (Administration) Act 1999 s 32, 82(1)

Acts Interpretation Act1901 s 15AA

REASONS FOR DECISION

30 November 2007   Senior Member L Hastwell           

1.      Anthea Llewellyn (the applicant) is a recipient of Family Tax Benefit (FTB) and Child Care Benefit.(CCB)

2.      On 14 December 2005 the Family Assistance Office (FAO), raised a CCB debt of $1,504 .99 as a result of the 2004/2005 CCB reconciliation process.

3.      On 16 December 2005 the FAO raised a FTB debt of $2,025.25 as a result of the reconciliation process for the same years.

4.      On 9 August 2006 a reconciliation of FTB was conducted for the 2005/2006 years and a top-up amount of $1,858.30 was calculated to be available.  This comprised a FTB Part A supplement of $1,427.60, a FTB Part B supplement of $306.60 and FTB Part B arrears of $124.10.  The total FTB to which the applicant was entitled for the previous year based on the actual family income was calculated, the amount already received  by her was brought to account and the balance owed to her was the top-up amount. 

5.      On that same day a decision was made to offset that top-up amount against the FTB debt for the 2004/2005 financial year, being the debt set out in paragraph 3 hereof.

6.      The applicant sought review of that decision to an Authorised Review Officer (ARO) who affirmed that decision on 14 November 2006.  She applied for review to the Social Security Appeals Tribunal (SSAT) who affirmed the ARO decision on 20 February 2007.  She has applied for review of the SSAT decision to this Tribunal.

issues

7.      The issues to be determined in this case are:

·can top-up payments of FTB supplement available after the annual reconciliation process has been completed be used to offset a FTB debt for a previous year;

·if so, should the applicant's top-up payments be applied wholly or only partly to offset a FTB debt for the previous year; and

·does the reconciliation amount available when the calculation is done at the end of the FTB year, amount to arrears?

legislation

8. Section 82(1) of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act) provides as follows:

“82  Methods of recovery

(1)A debt owed by a person, other than an approved child care service, is recoverable by the Commonwealth by one or more of the following means:

(a)deductions from instalments of family tax benefit to which the person is entitled;

(b)setting off arrears of family assistance to which the person is entitled against the debt;

(c)repayment by instalments under an arrangement entered into under section 91;

(d)if section 92 applies to another person who is entitled to be paid family tax benefit by instalment—deductions from that other person’s instalments of family tax benefit;

(e)if section 92A applies to another person who is entitled to arrears of family assistance—setting off the arrears against the debt;

(f)       the application of an income tax refund owed to the person;

(g)if section 93 applies to another person to whom an income tax refund is owed—the application of that refund;

(h)      legal proceedings;

(i)        garnishee notice.”

the hearing

9.      The applicant represented herself at the hearing.  Her husband, Daniel Llewellyn, was also present and spoke to the Tribunal.  The T documents were received into evidence.  Other exhibits were also received and will be referred to where relevant.

10.     The applicant does not dispute the facts of the case.  She challenges the right of the respondent (the Department) to use the supplementary amounts paid at the end of the FTB year, and after the reconciliation process has taken place, to offset against a previous debt of FTB.

11. She argues that the sum that became available after the reconciliation of August 2006 was a supplementary payment and not “arrears” and therefore s 82(1)(b) of the Administration Act does not apply and the payment cannot be used for a recovery of a previous debt of FTB supplement. Section 82(1)(b) only provides for recovery from “arrears”.

12.     She points to the fact that prior to 1 July 2006, the Departmental policy was that arrears were only ever used to offset the debt in the current financial year and were not used to pay off a debt of previous years.  That policy changed from 1 July 2006 onwards, but this was not made clear on the Centrelink website.

13.     The applicant was on unpaid maternity leave when she received a telephone call from Centrelink in August 2006 advising her of the outcome of the reconciliation for the 2005/2006 year.  She was told that some of the top-up would be offset against a debt for the 2004/2005 year and that $900 would go into a bank account the next day.  That sum was not paid and the entire sum was offset against the debt. 

14.     The T documents would appear to support the applicant's contention that she was told that she would receive at least $900 of the payment.  Records of telephone contacts that she had with the Department on 5 September 2006, 21 August 2006 and 22 August 2006 all record her saying that she was told on 18 August 2006 that she would receive at least $900 of the FTB reconciliation payment.

15.     The applicant had earmarked the top-up payment for specific expenses.  She and her husband had three small children and at the time of the reconciliation her husband was the sole income earner in the family as the youngest child was born only a few months earlier.

16.     The Centrelink website had stated that a change of policy to debt recovery would commence from 1 July 2006, but that this change was “subject to the passing of legislation”.  The website foreshadowed that after that date the Department would use reconciliation payments to offset outstanding Family Assistance debts.  Legislation has never been passed by Parliament, and yet the change in policy has been implemented and the applicant’s FTB supplement was offset against a FTB debt incurred in a prior year.  The website statement was misleading and the applicant considered that its content supported her position that a change of legislation was required to give effect to this change in policy.

17. The applicant had been repaying the FTB debt by fortnightly withdrawals from her benefit in accordance with an arrangement entered into with the FAO in accordance with s 82(1)(A) of the Administration Act. She proposes that she be able to continue payments using this method and that the supplementary payments be returned to her.

18.     The applicant contends that the concept of “arrears” and “supplement” are quite different and that only a very small amount of the 2005 -- 2006 reconciliation amounted to FTB arrears and the balance amounted to supplement of FTB part A and FTB Part B.

19.     A FTB practitioner from the Department was called at the request of the applicant to provide evidence as to how the reconciliation and recovery process operates.  She described the FTB supplement as an extension of the Part A and Part B payment.  This supplement has been designed as a tolerance because of the difficulty people experience in estimating their income in a year.  It is designed to reduce the debt that some families were incurring by providing an arrears payment against which a debt can be offset.  The supplements were not payable until the end of the financial year and once a reconciliation process had been carried out. Nevertheless, she saw the supplement as part of the FTB entitlement paid to a family in a year, but paid in arrears.

findings of fact

20.     The Tribunal finds as a fact the matters set out in paragraphs 1 to 5 of this decision.

21.     The applicant entered into an arrangement with Centrelink with respect to the 2004/2005 debt and she was repaying that by instalments deducted from her benefits at the time that she became entitled to the top-up payments in August 2006.

22.     The applicant was advised by a Departmental officer by telephone in August 2006 of her entitlement to a top up/supplementary entitlement to FTB for the 2005/2006 financial year.  She was told that some of the sum would be used to offset the balance of her FTB debt from the 2004/2005 financial year and she would receive $900.

23.     The applicant did not receive any of the supplementary entitlements and they were fully offset against her 2004/2005 debt.

24.     There was a change of Centrelink policy as of 1 July 2006 and thereafter the top-up or supplementary payments of FTB Part A and FTB Part B were used to pay FTB debts incurred in previous years.  The Centrelink website did indicate at one stage that the change of policy would be subject to the passing of legislation.  The policy has been implemented without further legislative amendment.

discussion

25.     The Tribunal notes the policy guidelines contained in The Family Assistance Guide (the Guide) at 7.2.3 which covers the offsetting of arrears of FTB to repay a debt.  The relevant section of the Guide reads as follows:

“7.2.3  Debt Recovery From Arrears of FA

Summary

This section provides information about offsetting arrears of FA to repay a debt (1.1.D.60).  It includes offsetting arrears of:

·child care benefit,

·FTB, MAT or MIA owed to the debtor, and

·FTB, MAT or MIA owed to another consenting person.

From 1 July 2006, any available FTB top-up or lump sum payments paid through Centrelink will be used to offset any outstanding FTB debts from current and/or previous years.

A time limit, Family Assistance (Administration) Act section 86(1) applies to recovery under these provisions.

Top-up payments

Top-up is the balance of entitlement due to a recipient, mainly recipients who receive FTB by fortnightly instalments or CCB as reduced child care fees.  Top-up payments include supplements to which a recipient is eligible.

Available FTB top-ups will be used to offset all FA debts and any residual amounts sent to the ATO, which will then offset outstanding tax debts with the remaining amount.”

26.     The Guide anticipates the use of what is referred to as “top-up” payments and “supplements” to offset outstanding FTB debts from current and/or previous years. 

27. The supplement becomes payable under the provisions of s 32 of the Administration Act.

28. If the supplement can be termed “arrears”, it falls within the wording of s 82(1)(b) of the Administration Act and the Department was entitled to offset the debt in this case.

29. The Department has urged the Tribunal to interpret the relevant section by having regard to the policy set out in the Guide. The applicant argues that a change in the law is required to allow an offset of FTB to occur and the supplement is not “arrears” within the meaning of the Administration Act.

30.     The Tribunal accepts that appropriate consideration must be given to policy guidelines issued by the Minister.  Nevertheless, policy guidelines are not binding on the Tribunal.  The Centrelink website did foreshadow a change in the law, but there is also the possibility that the Department, having taken advice on the relevant legislation, decided that they already had the power to offset the supplement against a debt without resorting to legislative amendment

31.       The applicant provided the Tribunal with dictionary definitions of “arrears” and “supplement” (Exhibit A2).  The word  “arrears” is defined in The Cambridge Advanced Learner’s Dictionary as follows:

“money that is owed and should already have been paid”

The same term is defined in The Compact Oxford English Dictionary in the following way:

“money owed that should already have been paid … behind with paying money that is owed “

32.     The term “supplement” is defined in The Compact Oxford English Dictionary as follows:

”a thing added to something else to enhance or complete it … a separate section added to a newspaper or periodical”

The Cambridge Advanced Learner’s Dictionary defines “supplement” as follows:

“something which is added to something else in order to improve it or complete it; something extra”

33.     Can the supplementary reconciliation payments come within the meaning of the term “arrears”? The supplement does not become payable to the benefit recipient until such time as they provide satisfactory information to the Department as to their family income in the year of receipt of the FTB to enable the reconciliation process to take place.  If upon reconciliation, it transpires that they have not been paid the maximum rate of FTB payable for the year given their particular financial circumstances, then the top-up becomes payable.

34.      It appears that one of the reasons for introducing the supplement was to alleviate the problems many families were facing by under-estimating income and then facing a debt to the Department.  It is designed to provide some tolerance for incorrect estimations of income.  It is part of the FTB that is paid in arrears once the reconciliation process has been completed.

35.     The FTB Part A and Part B supplements were introduced in 2004.  The Explanatory Memorandum with respect to the introduction of the Bill refers to the supplements as being a lump sum supplement payable upon reconciliation for the previous year.  The supplement is to be included in the individual's maximum rate of FTB Part A or Part B.  However, it is not included until the reconciliation occurs.

36.     The applicant encourages the Tribunal to adopt a narrow interpretation of the term “arrears”.  The Department contends that the Tribunal should adopt a much broader interpretation based on the Parliamentary intention that the FTB top-up payments were intended to be a payment in arrears of FBT that was part of the maximum rate payable, but was delayed to provide some tolerance for incorrect estimates of income.

37.     The Tribunal was referred to the Second Reading Speech to the Bill which introduced the FTB Part A supplement.

38.     In that speech, the Honourable Kay Patterson refers to the supplement as being an increase in the maximum and base rates of FTB Part A payable in each year but payable upon income reconciliation for the prior year.  The Second Reading Speech states:

“As well as providing extra assistance to families, this lump sum will be available, if required, to offset any family assistance overpayment that may have occurred during a previous income year.”

39.     This accords with the explanation given by the Departmental officer  who gave evidence to the Tribunal.

40. Section 15AA of the Acts Interpretation Act 1901 allows the Tribunal to look at the underlying purpose of legislation when interpreting legislation. Section 15AA provides as follows:

“15AA Regard to be had to purpose or object of Act

(1)       In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.”

41.     The supplement is part of the rate of FTB payable in any given year to a person.  It is a payment in arrears which is made after the reconciliation process has taken place.  If consideration is given to the letter to the applicant of 17 August 2006 in which she was notified of the adjustment (T4/27), it is clear that the supplement is treated as part of the annual maximum benefit payable for the previous year, but is not paid until the after the conclusion of that financial year.

42.     The supplement has been designed to ensure the more efficient administration of the FTB payment scheme.  It gives the Department a fund against which debts can be offset if a family has overestimated their income in a prior year.

43. The Tribunal is satisfied that the payment in question is a payment in arrears and comes within s 82(1)(b) of the Administration Act. The Department acted lawfully and within it powers in offsetting the supplement against an existing debt.

44.     The applicant and her husband are not in any financial difficulties.  They are frustrated at the situation, but agree that they do no have a “need” as such to have payments refunded, but rather it is a matter if principle.

45.     It is unfortunate that the applicant was given some hope of receiving at least some of that supplement by a Departmental officer at a time when the family income was tight and she had already planned how to allocate the funds.

46.     The interpretation contended by the Department is in line with the purpose of the legislation and in the circumstances the Tribunal affirms the decision under review, being satisfied that the supplement amounts to an payment of FTB in arrears.

I certify that the 46 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member L Hastwell

Signed:         .....................................................................................
  Associate

Date of Hearing  3 October 2007
Date of Decision  30 November 2007
Advocate for the Applicant       In person

Advocate for the Respondent  Ms Martine Welfare

Centrelink Legal Services Branch