Manning and Secretary, Department of Education, Science and Train Ing

[2003] AATA 191

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 191

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2001/1157 

GENERAL ADMINISTRATIVE DIVISION		)
Re		Lisa Manning

Applicant

And Secretary, Department of Education, Science and Training

Respondent

DECISION

Tribunal  Ms N Isenberg, Member

Date27 February 2003

PlaceSydney

Decision The Administrative Appeals Tribunal affirms the decision under review.

[Sgd] Ms N Isenberg
  Member

CATCHWORDS

AUSTUDY - actual means test - after tax income of notional parent - designated parent – overpayment – school fees – average rental market – “expenditure” – notional family income – “actual means” – waiver in special circumstances - decision affirmed.

LEGISLATION

Student and Youth Assistance Act 1973 sections 56, 289, 290C

AUSTUDY Regulations 12K, 12L, and 12N

CASE LAW

McMullen and Secretary, Department of Employment Education Training and Youth Affairs (unreported AAT 11740, 1 April 1997)

Re Department of Employment, Education, Training & Youth Affairs and Duscher (Unreported AAT 11347, 1 November 1996)

Beadle v Director-General of Social Security (1985) 60 ALR 225

REASONS FOR DECISION

27 February 2003 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 Education, Science and Training ("the Department") on or about 18 September 1996 as affirmed by the Authorised Review Officer on 25 November 1996 (T11) to cancel AUSTUDY payments to the Applicant and to raise a debt of $2,788.65.  That decision was affirmed by the Social Security Appeals Tribunal (“the SSAT") on or about 6 January 1997 but a copy of the latter decision cannot now be located.

BACKGROUND

2.      In 1995 Lisa Manning was a Year 11 student at Kambala.  She applied for and was granted AUSTUDY for that year.  Towards the end of that year she was invited to complete a ‘continuing application’ for her anticipated studies in 1996.  The form required completion by the Applicant and both of her parents.  The form was signed on 29 November 1995 and her AUSTUDY was continued the following year.  Sometime in 1996 her brother Richard also applied for AUSTUDY but it was rejected on the basis of information provided in respect of the family’s assets.  On the basis of the same information, Lisa’s AUSTUDY was cancelled and a debt was raised for the payment which had already been made to her in 1996, totalling $2,788.65.

APPEARANCES

3.      A hearing was held before the Tribunal on 17 December 2002 at which the Applicant was represented by her father, Mr D Manning and the Respondent was represented by Mr G Peek of the Australian Government Solicitor.

LEGISLATION

4. Eligibility for payment under the AUSTUDY scheme is governed by the AUSTUDY Regulations (“the Regulations”) made pursuant to section 56 of the Student and Youth Assistance Act 1973 (“the Act”). 

"Chapter 2 - Who can get AUSTUDY?" of the Regulations sets out the requirements for eligibility. All students must meet the general requirements set out in Part 1, which deals with citizenship, age and approved courses of study. Divisions 1 and 1A of Part 1 indicate when benefits are payable and to whom such payments are to be made, and make provision for alteration of payments.

The former "Division 1B - Means test: parent and spouse" of the Regulations provides for the application of a means test to parents and spouses of students who apply for AUSTUDY. Eligibility for AUSTUDY may be assessed according to different criteria, depending upon the circumstances of the particular applicant, and in relevant cases, his or her family.

5.      In this case, the eligibility of the appellant was to be determined pursuant to the means test set out in "Subdivision B - Actual means test: parents" of Division 1B.  The appellant does not dispute that this was the appropriate method of calculation in her circumstances. 

6.      The relevant provisions relating to assessment are as follows:

"12K Actual means test: parent

12K(1)      A student ("the designated student") who has a parent that is a       designated parent is not entitled to receive living allowance in respect of a         period of eligibility in a year of study, unless the Secretary is satisfied that,      for that period, the actual means of the designated parent are less than, or        equal to, the after tax income of a notional parent.

(2)For the purposes of subregulation (1), a notional parent, in relation to any particular designated student, is a parent who:

(a)      receives income solely from a salary or wage source; and

(b)is a parent of a student who qualifies for living allowance at the same rate as the rate for which, apart from this Division, the designated student would qualify; and

(c)has children of the same number and age as has the designated parent.

…

12L Who is a designated parent?

12L     (1)      For the purposes of subregulation 12K(1), a parent is a designated parent             if he or she:

....

(b)      has an interest in:

(i)an asset located outside Australia (and its external territories); or

(ii)a proprietary company or an unlisted public company; or

(iii)a trust; or

…

(d)      is a self-employed person (except a primary producer to whom                  subregulation 19 (2) applies); or

… ”

7.      Although initially raised as an issue in the case there was no dispute that Mr Manning was a designated parent for the purposes of the Regulation by virtue of either subregulations 12L(b) or (d) above.

“12N What are the actual means of the designated parent?

12N     (1)      For the purposes of subregulation 12K(1), the actual means of a  designated parent for the period of eligibility are taken to be the total  expenditure and savings made in that period by the parent and his or her   family.

(2)      If the Secretary reasonably believes that the total amount expended in a               particular transaction does not represent a fair market price for the   transaction, the Secretary must impute a value to the transaction, for the   purpose of this regulation, that he or she considers to be the fair market                   price.

(3)      If the Secretary reasonably believes that a transaction engaged in by a                 person, other than the parent or a member of his or her family, is a   transaction engaged in for the benefit of the parent or a member of his or   her family, the Secretary must impute a value to the transaction, for the             purpose of this regulation, that the Secretary considers to be the fair                  market value, as if the parent or member of his or her family had   expended the amount.

(4)      An amount of expenditure or savings is taken to be expended or saved,     as the case may be, in a particular period if: (a) the expenditure or the      savings occurred in that period; or (b) the Secretary reasonably believes           that the expenditure or savings should be taken to have occurred in that      period.

(5)      In this regulation: "family", in relation to a parent, means only the following   persons:

(a)  the parent's spouse (if any), being a person:

(i)to whom the parent is married and from whom the parent is not separated; or

(ii)with whom the parent lives in a de facto relationship;

(b)  the student;

(c)  a person aged 15 years or less who:

(i)is a natural or adopted child of the parent; or

(ii)       is wholly or substantially dependent on the parent;

(d)  a person of the kind described in subparagraph (c) (i) or (ii) aged 16 years or more who:

(i)is undertaking full-time study; and

(ii)is not taken to be independent under regulation 67; and

(iii)is not in the guardianship, care or custody of a court, Minister or Department; and

(iv)is not the subject of a current direction of a court, Minister or Department placing him or her in the guardianship, care or custody of someone who is not the person's natural or adoptive parent.”

8.      The hypothetical "notional parent" serves as a benchmark for eligibility.  The core concept of a "notional parent's means" is "after tax income ... solely from a salary or wage source" (regulation 12K). 

9.      No issue has been taken with the Respondent's calculations of the actual after tax income of the notional parent in this case, in accordance with regulation 12M.  That income would be:

·     $30,340 from 1 January to 15 April 1996

·     $28,433 from 16 April 1996 to 3 June 1996

·     $30,217 from 4 June 1996 to 31 December 1996

(These are referred to as the ‘benchmarks’).

ISSUE BEFORE THE TRIBUNAL

10.     In determining whether the Applicant was entitled to AUSTUDY in 1996 the Tribunal had essentially to decide whether the Applicant’s family’s total savings and expenditure in 1996 exceeded the after tax income of the notional parent, thereby precluding her from eligibility for AUSTUDY.

EVIDENCE: Documents

11.     The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence.

12.     In addition, the following documents were tendered:

Exhibit	Description	Date
TD1	T Documents T1 – T21 pages 1 - 60
A1	Initial Application Form
A2	Sydney Water rates and Willoughby City Council rates	15/5/2002 25/10/2002
R1	Survey from The Australian, “Advance Australia where”	June 2000
R2	Facsimile from Cranbrook School regarding fees	4/11/2002
R3	Facsimile from Kambala regarding fees	2/9/2002
R4	AUSTUDY Application of Mr Richard S Manning	7/9/1998
R5	Respondent’s Statement of Facts and Contentions	20/11/2002

13.     In addition, Mr Manning had copies of invoices from his children's schools but these were illegible.  The matter was adjourned so that fresh copies could be obtained and these were subsequently marked as Exhibits R2 and R3.

EVIDENCE and SUBMISSIONS: Mr D Manning

14.     Mr Manning gave evidence and was cross-examined on behalf of the Respondent.  Questions were also put to him by the Tribunal.  As the hearing was conducted somewhat informally some information was provided by the solicitor for the Respondent in the course of Mr Manning’s evidence in chief.

15.     Mr Manning agreed that in the completion of his daughter’s application for AUSTUDY (T2, p13) that he had answered ‘No’ in answer to the questions:

“Are you:

·     involved in a trust, private company or partnership; OR

·     self-employed (except if engaged wholly or substantially in primary production); OR

·     a migrant who entered Australia under a business skills category; OR

·     receiving any income from overseas or do you have assets overseas?”

16.     As a result no further enquiry was made in relation to the family’s anticipated 1996 expenditure and savings.  By answering ‘Yes’ he would have been asked to complete an Actual Means Form.

17.     In the course of the conferencing process leading up to the hearing Mr Manning agreed to complete an Actual Means Form (Exhibit A1) indicating his actual expenditure in 1996, which, after adjustment for arithmetic errors, came to $29,580.  Mr Manning adopted the form although sought to make some amendments to the information provided there, as follows:

ACCOMODATION:

18.     On the form Mr Manning noted that the family rented its home at 38 Coorabin Rd, Northbridge and that $5,000 was paid in 1996 by way of rental.  At the hearing Mr Manning said that the house belonged to his parents who lived nearby.  In support of his contention he provided copies of (current) water and council rate notices showing his parent(s) as owners.  He said his family, that is, he, his wife and Lisa and Richard, had lived in the house since about 1994 and continue to do so.  He said that in fact the family paid no rent for the house, but he did pay outgoings such as rates and taxes, electricity and telephone.  He estimated that these totalled about $2,000.  He had written $5,000 to cover ‘a little bit of rent’ although none was in fact paid.  He regarded it as ‘board’ but no money changed hands.  He wanted to ‘do the right thing’ by his parents. 

19.     In cross-examination Mr Manning said he did not think Northbridge was ‘exclusive’ in 1996, although it is now.  He thought that in 1996 it was only ‘average’.  He agreed though that at that time the average market rental was in the vicinity of $16,000 - 17,000.  He agreed that had he not been able to avail himself of the property he would have had to pay rent.

SCHOOL FEES:

20.     In the form Mr Manning had recorded that Lisa’s fees were ‘not paid at this time’ and that Richard’s fees (at Cranbrook School) were $4,000.  Richard’s additional schooling expenses were said to be another $1,000 and Lisa’s, $1,700.  In all, $6,700 was said to have been paid in education expenses.

21.     In his evidence Mr Manning said that he understood he had paid $4,250 in fees to Cranbrook and about $500 to Kambala.

22.     The documents provided by the schools show that during 1996, $1,500 was paid to Kambala and $7,909.33 was paid to Cranbrook.

23.     As to the family’s financial situation generally Mr Manning told the Tribunal that he has been self-employed as a music industry distributor since 1992 or 1993 and continues in that business, although nowadays to a lesser degree.  Prior to commencing that business he had extensive property interests, held through a family company, EVDAV Pty Limited, of which he and his wife were the directors.  The company was not operating in 1996 although it had been active in the 1980s and early 1990s.  His financial situation was very comfortable in the 1980s but this changed with the ‘bust’ of the 1990s.  Nowadays he described himself as being in the ‘service industry’, identifying properties for developers.

24.     In cross-examination Mr Manning was asked about his responses at question 18 wherein he indicated that the family had, in 1996, spent $300 on clothing, $400 on entertainment and $300 on books, newspapers etc.  He said that there was ‘not too much restauranting’ and they ate at his mother’s three to four times a week.  His parents also provided a lot of gifts, although no cash.  In answer to questions by the Tribunal he said that Lisa and Richard wore, for example, ‘no frills’ joggers.  In any event, they already had ‘everything’ from the better times so it was only if things needed replacement that they were purchased.

25.     As to his answer in question 19 he said that he knew his life insurance ‘to the dollar’ so the figure of $1,200 was definitely accurate.  The figure of $400 for accountants’ fees was accurate also and he did not pay for the legal advice he received during the year.  He looked up the loan repayments of $600 which he thought were for his credit card.  He does not keep chequebooks for very long.

26.     In 1996, largely as a result of their change in financial circumstances, his wife was threatening divorce, but it did not eventuate.  They had been married for about 25 years.  He was very distressed by the prospect of their separation, as his wife wanted ‘half of everything’..  The Tribunal asked what this was but he said it was just the cars and household goods and her jewellery.  She also had an inheritance that she wanted to protect.

27.     As a result of the dispute he did not work as much as he should have but his income was ‘bordering on nil’.  His wife had to go to work and she put in some money to support the family.  He doesn’t know what happened to the rest of her income but she may have saved it.  Such savings however would have been ‘insignificant’, although she was no doubt trying to put money away to provide for herself if they separated.

28.     He was personally distressed for six to seven months but Lisa required hospitalisation in Royal North Shore Hospital, having become ‘psychotic’..  She later required outpatient treatment ‘for some time’ from a psychiatrist provided by the hospital.  All expenses were met by Medicare or their health fund.

SUBMISSION: Respondent

29.     It was submitted on behalf of the Respondent that the ‘rent’ paid by the Manning family was not a fair market price for the transaction.  In those circumstances the Tribunal must impute a value to the transaction.  The solicitor for the Respondent referred the Tribunal to McMullen and Secretary, Department of Employment Education Training and Youth Affairs (unreported AAT 11740, 1 April 1997).

30.     It was contended that a fair market price would be $16,500.  In this regard assistance was sought from Exhibit R1 wherein the average weekly rent for Northbridge (as one of the suburbs in a grouping of postcodes with the highest weekly average household income) in 1996 was estimated at $330.10.  Adjusting the Actual Means Form to take this into account results in the actual means exceeding the benchmarks in each of the three benchmark periods.  Even if only a few thousand dollars were imputed then the benchmarks would be exceeded.

31.     In relation to education expenses the solicitor for the Respondent noted the differences in the entries made by Mr Manning on the Actual Means Form and the information provided by the schools.  The Respondent noted the Kambala fees of $1,500 (compared to $500 suggested by Mr Manning at the hearing) and calculated the Cranbrook fees at $7,909.33 (compared to $4,250 suggested by Mr Manning at the hearing).  In addition, because the last account is dated only 3 October 1996 it was submitted that the balance of $2,516.97 should also be regarded as having been paid that year.  If this were accepted the total education expenses would be $11,926.30. 

32.     If this were the case, and not taking any account of the submission in relation to rental, again the actual means would exceed the benchmarks in each of the three benchmark periods.

33.     As to expenditure generally the solicitor for the Respondent submitted that the amounts recorded for general expenditure, such as clothing, were unreasonably low and as such adjustments should be made to the actual means to take account of this.

FINDINGS

34.     In coming to the correct and preferable decision, the Tribunal took into account all the evidence, submissions, case law and relevant legislation.

35.     In Re Department of Employment, Education, Training & Youth Affairs and Duscher (unreported AAT 11347, 1 November 1996) DP Forgie referred to the Explanatory Statement made when the Regulations were amended in 1995. That statement said, in part, that the Regulations:

“... have introduced measures to improve the targeting of AUSTUDY to those in genuine need.  The AUSTUDY means testing arrangements have been modified by the regulations so that, in specified circumstances, the actual means available to a family, as indicated by actual household expenditures and outgoings, will determine whether the student is entitled to assistance.”  

36.     The meaning of “expenditure” was considered in Duscher (supra) in some detail:

“Taking the intention of the provisions relating to the actual means test as set out in the Explanatory Statement it would seem that it is the ordinary meaning of the words ‘expenditure’ and ‘savings’ which should be adopted.  What is intended is that the actual means be determined by having regard to what the family spent (expenditure) and what it put by (savings) or kept from its income instead of spending during the period of eligibility.”

37.     Through the Actual Means Test an equitable basis is provided for targeting publicly funded student assistance in cases where a family’s taxable income may not reflect its actual financial position.  So far as is relevant here, it works on the principle that a student with a parent will not be eligible for AUSTUDY if the family’s actual means, as represented by its expenditure and savings during the year of study, exceed the after tax income of a notional wage and salary earner.

38.     In this case the notional family income is as follows:

·     $30,340 from 1 January to 15 April 1996

·     $28,433 from 16 April 1996 to 3 June 1996

·     $30,217 from 4 June 1996 to 31 December 1996

39.     In McMullen (supra) the Tribunal described the Actual Means Test as applying on a “sudden death” basis.  That is, if the family’s actual means is found to exceed that of the notional family then an applicant for AUSTUDY will automatically be ineligible.

40.     On the basis of the Applicant’s Actual Means Form the family’s total expenditure was $27,900.  An arithmetical error occurred in relation to transport, and upon adjustment the total became $29,580, that is an amount in excess of the notional income for one of the periods. 

41.     The calculations included ‘principal family home expenditure’ totalling $8,000.  At the hearing Mr Manning amended the entries such that he said the family had in fact paid no rent for the house, but that he did pay outgoings such as rates and taxes, electricity and telephone which he estimated totalled about $2,000.  The Tribunal accepts Mr Manning’s evidence that the family only paid the outgoings referred to above as the sole contribution to rent.

42.     This would have the effect of reducing the principal family home expenditure to $5,000 and the family’s overall expenditure to $23,580, that is, less than the notional income for all three periods.  This represents the Applicant’s best case.

43.     The Respondent’s contention, in summary, was that Mr Manning’s account of the family’s expenditure was inaccurate on two main bases.  First, the expenditure on Lisa and Richard’s education as recorded on the Actual Means Form had been shown to be inaccurate, having regard to the information provided by the schools.  However, even with adjustments for the monies actually paid, the threshold is still not exceeded in respect of any period.  It is only if the Tribunal accepts the Respondent’s contention that because the last school account is dated only 3 October 1996 the outstanding balance of $2,516.97 should also be regarded as having been paid that year.  If this were accepted the total education expenses would be $11,926.30.  In those circumstances the threshold would be met in one period.  The Tribunal was not prepared to accept this submission as there was no evidence that the balance of monies owing was in fact paid in that year, and there was evidence before the Tribunal that Mr Manning had previously successfully negotiated with the schools for fee relief in the form of delayed payments.  It does not follow that that amount was in fact paid, or that it actually remained payable in 1996.

44.     A more significant argument was in relation to the accommodation provided to the family by Mr Manning’s parents.  While the Tribunal accepted that family’s only pay payment for accommodation expenses was $2,000 in outgoings, the issue was whether, pursuant to regulation 12N(2), this could be said to be a ‘fair market price’.  The evidence before the Tribunal was that in 1996 rentals in Northbridge were in the vicinity of $16,000 - 17,000.  The Tribunal accepted this as evidence of a fair market price.

45.     In McMullen (supra) the Tribunal was referred to the Department’s AUSTUDY Policy Guidance Manual where actual means are defined in the following terms:

“7.11.1.5  Actual means are the financial means which a family has Definition of   access to during the period for which AUSTUDY is being actual means   sought. Actual means are an indicator of the family’s capacity        to provide financially for their children’s education.

Actual means are taken as being represented by the family’s

domestic outgoings, that is, total expenditure on living, lifestyle

enhancement, savings and investments.

…

Outgoings are not restricted to formal financial transactions by family members.  They can include goods and services:

·   obtained by barter or ‘cash-in-hand’; or

·   provided to or on behalf of assessable family members by non‑assessable parties (eg family company shareholders, grandparents etc).

Where expenditure on a particular good or service appears not to represent a fair market price, the Department’s Secretary (or his/her delegate) must attribute a fair market value to the transaction.”

(Tribunal’s emphasis)

46.     With this in mind the Tribunal took the view that the Manning family did not pay a fair market price for accommodation.  Had they done so the family’s expenditure would have increased by at least $16,000 in addition to the outgoings for which they would continue to be liable.  Mr Manning conceded that had the property not been available from his parents, rent in that order would have had to be paid.  That it was a generous arrangement with Mr Manning’s parents, in providing for the family when it fell upon hard times, does not exclude it from the calculations.

47.     That being the case, the notional family income would have been clearly exceeded in each of the relevant periods.  Hence the Applicant was not entitled to AUSTUDY during 1996.  This has resulted in an overpayment of $2,788.65. 

48.     The Act provides for waiver of an overpayment as follows:

Former section 289 of the Act (now section 43B)

“289 Waiver of debt arising from error

Administrative error
289 (1)     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.

Note: Subsection (1) does not allow waiver of part of a debt that was caused
partly by administrative error and partly by one or more other factors (such
as error by the debtor).

Underestimating value of property

(2)     If:

(a)a debt arose because the debtor, the debtor's partner, or the debtor's parent or parents underestimated the value of particular property; and

(b)   the estimate was made in good faith; and

(c)the value of the property was not able to be easily determined when the estimate was made;

the Secretary must waive the right to recover the proportion of the debt
attributable to the underestimate.

Proportion of a debt

(3)For the purposes of this section, a proportion of a debt may be 100% of the debt.”

49.     In this case the Tribunal finds that the Applicant, Lisa, received the monies in good faith..  She appears to have left the application for AUSTUDY to her father.  However the issue of good faith only arises where there has been an administrative error by the Commonwealth and in a situation where this is the sole cause of the overpayment.  This is clearly not the case in this matter.

50.     The Tribunal then turned to consider if there were special circumstances to waive the debt.

Under section 290C of the Act, the Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

“(a)the debt did not result wholly or partly from the debtor or another person knowingly:

(i)        making a false statement or a false representation; or

(ii)       failing or omitting to comply with a provision of this Act; and

(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c)       it is more appropriate to waive than to write off the debt or part of the debt.

… ”

51.     The Tribunal is satisfied that the debt did not arise from the Applicant or her father or from any member of her family making false statements.  While only $2,000 may have been paid to the Applicant’s grandparents, what had been recorded was, in the Tribunal’s view, recorded in truthfulness.  It is the imputation by the Secretary, which is confirmed by the Tribunal, in rejecting that entry that has affected entitlement.

52.     The matter has come to light again now that Lisa is working and the Respondent garnisheed the Applicant’s 2001 tax refund.  There was no evidence of Lisa’s ‘special circumstances’.  The Tribunal does not consider her to be in financial hardship in that her circumstances are not "unusual, uncommon or exceptional" (Beadle v Director-General of Social Security (1985) 60 ALR 225).  The family has had the benefit of the overpaid amount for some five years.

DECISION

53.     The Administrative Appeals Tribunal affirms the decision under review.

I certify that the 53 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Member

Signed:         L Bonouvrie
  Associate

Date of Hearing  17 December 2002
Date of Decision  27 February 2003
Representative for the Applicant               Mr D Manning
Solicitor for the Respondent  Mr G Peek