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

[2019] AATA 2477

McDonnell and Secretary, Department of Social Services (Social services second review) [2019] AATA 2477 (9 August 2019)

Division:GENERAL DIVISION

File Number:2018/4738           

Re:Rebecca McDonnell  

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Member D Mitchell

Date:9 August 2019

Place:Brisbane

The Tribunal affirms the decision under review.

...........................[SGD].....................................

Member D Mitchell

CATCHWORDS

SOCIAL SECURITY – Family Tax Benefit – overpayment – where no administrative error – where no special circumstances – decision under review affirmed

LEGISLATION

A New Tax System (Family Assistance) Act 1999 (Cth)
A New Tax System (Family Assistance)(Administration) Act 1999 (Cth)

CASES
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Jones and Secretary to the Department of Family and Community Services [2003] AATA 62 (22 January 2003)
Klaverstyn and Secretary, Department of Family and Community Services [2—3] AATA 71 (24 January 2003)
Secretary, Department of Social Security v Hales [1998] FCA 219
Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190

REASONS FOR DECISION

Member D Mitchell

9 August 2019

INTRODUCTION

1. Ms Rebecca McDonnell (the Applicant) contacted the Respondent on 12 May 2016 and provided updated income estimates for the 2016/2017 financial year for herself and her husband for the purpose of receiving Family Tax Benefit (FTB).  She provided estimates of $0 taxable income for herself and $100,000 in taxable income for her husband.[1]

   [1] Exhibit 1, T Documents, T24, Document List and customer contact noes for the period 07.07.2015 – 11.06.2018, page 219.

2. On 18 June 2016, the Respondent sent a notice to the Applicant setting out that her family assistance payments were being assessed on the basis of a FTB Part A combined income of $100,000 and FTB Part B with the income being $0.[2] This notice set out that the Applicant was required to notify the Respondent about any changes to her or her husband’s income.[3]

   [2] Exhibit 1, T Documents, T10, Centrelink Notice: Your family assistance, page 134.

   [3] Exhibit 1, T Documents, T10, Centrelink Notice: Your family assistance, page 135.

3. After income information was obtained from the Australian Taxation Office (ATO), the Applicant’s FTB for the 2016/2017 financial year was reconciled on 28 November 2017. The information from the ATO confirmed that the Applicant’s income for the 2016/2017 financial year was $0, however advised that her husband’s actual taxable income was $101,056.[4]

   [4] Exhibit 1, T Documents, T23, Centrelink Mainframe Screen printouts, pages 184-185.

4. The Respondent issued a notice to the Applicant on 28 November 2017 advising her that she had a legally recoverable FTB debt totalling $4,142.75 for the 2016/2017 financial year.[5]

   [5] Exhibit 1, T Documents, T16, Centrelink Notice: Account Payable – Family Tax Benefit 2016-2017, page 152.

5. The Applicant sought review of that decision. On 23 May 2018, an authorised review officer (ARO) affirmed that decision.[6]

   [6] Exhibit 1, T Documents, T19, Decision and notes of Authorised Review Officer, pages 160-167.

6. The Applicant sought a first-tier review of that decision by the Social Services and Child Support Division of this Tribunal (SSCSD), who affirmed the decision of the ARO on          3 August 2018.[7]

   [7] Exhibit 1, T Documents, T2, Decision of the Social Security and Child Support Division; and Exhibit 2, Written Reasons of the Social Security and Child Support Division, page 2.

7. Following this, the Applicant sought a second-tier review of this matter by the General Division of this Tribunal, by way of an application dated 21 August 2018.[8]

   [8] Exhibit 1, T Documents, T1, Application for Review, page 1.

8. On 17 July 2019, a Hearing was held for this application. At the Hearing, the Applicant was self-represented and gave evidence under affirmation by telephone. The Applicant’s oral evidence was consistent with her written material and the Tribunal considers that she was open and honest in response to questions asked by both the Tribunal and the Respondent.

9. The relevant law in relation to the payment of FTB and recovery of debts to the Commonwealth is found in the A New Tax System (Family Assistance) Act 1999  
   (FA Act) and A New Tax System (Family Assistance)(Administration) Act 1999  
   (FA Administration Act).

   ISSUES

10. The issues for the Tribunal to consider are:

    1.Whether, the Applicant has been paid more than her correct entitlement to family tax benefit during the 2016/2017 financial year; and

    2.If so, whether the excess payments are a debt that is recoverable in part or in full?

    CONSIDERATION

    Did the Applicant receive the correct amount of FTB for the 2016/2017 financial year?

11. Section 21 of the FA Act provides the requirements for when an individual is eligible for FTB; and, refers to those provisions of the Act which are relevant in working out the individual’s rate of FTB.

12. Section 58 of the FA Act provides that, subject to sections 60 to 61B, an individual’s annual rate of FTB is to be calculated in accordance with the ‘Rate Calculator’ in

    
    

    Schedule 1. The Rate Calculator for FTB takes into consideration both the individual’s and their partner’s taxable income.

13. Clause 28(1) and (2) provides that an individual’s Part B rate for FTB is nil if the individual’s adjusted taxable income is more than $100,000 unless the individual or their partner is receiving a social security or service related pension or benefit.

14. Where it is determined that a person is eligible to receive FTB, their rate is calculated and the general proposition is that a reconciliation will be undertaken to ensure that the person is paid the correct amount of FTB during the relevant period.

15. When a person’s income is verified, no later than 30 June of the following income year (through the lodgement of their and if applicable their partners income tax return for the benefit year) and the other reconciliation conditions are met they become entitled to any additional FTB that may be payable, including FTB supplements.  Where a person does not satisfy the reconciliation conditions there will be a limit placed on the amount of FTB that may be paid. Where a reconciliation shows that a person received more than their entitlement a debt will occur.

16. Section 71(1) of the FA Administration Act provides that, if a person receives a FTB payment that they were not entitled in respect of a period or event, the amount of the payment is a debt owed to the Commonwealth.

17. Section 71(2) of the FA Administration Act provides that if a person has been paid an amount and received an amount that is greater than the amount that should have been paid to the person the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.

18. The Respondent contends that the Applicant’s adjustable taxable income for the purposes of her FTB Part B rate for 2016/2017 was $101,056 and had therefore exceeded the $100,000 qualification threshold and she was therefore not eligible to receive any FTB Part B payments for that period.[9]

    [9] Exhibit 3, Secretary’s Statement of Facts & Contentions, page 5, paragraphs 22-25.

19. It is noted that neither the Applicant or her husband were in receipt of any of the payment or pension types outlined in clause 28(2) of Schedule 1 of the FA Act during the 2016/2017 financial year.

20. At Hearing, the Applicant told the Tribunal that she agreed that her and her husband’s income did exceed the amount that she had provided to the Respondent as an estimate for FTB purposes and that as a result a debt arose for the 2016/2017 financial year. The Applicant contended that the additional income earnt by her husband was outside their control.

21. Based on the evidence before the Tribunal, in particular the Applicant’s own admission that she was over paid FTB, I find that the Applicant received more FTB than she was entitled to during the 2016/2017 financial year and as such this overpayment is a FTB debt owed to the Commonwealth.

    FTB Debt repayable in part or in full?

22. As I have found that the FTB debt exists, I must consider whether the debt must be repaid.

23. It is generally expected that debts to the Commonwealth are recovered.  This proposition was expressed by French J in relation to debt recovery in Secretary, Department of Social Security v Hales [1998] FCA 219 as:

    The taxpayer is entitled to expect that in the ordinary course money paid to people that they are not entitled to received will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned.

24. However, there are circumstances where the recovery of a debt is either put on hold for a period of time (written off) or is no longer pursued (waived). Relevant to the Applicant’s FTB debt, the Respondent may write off, or waive, her FTB debt if the requirements set out in sections 95, 97 or 101 of the FA Administration Act are met.

    Should the Debt be written off pursuant to section 95 of the FA Administration Act?

25. Section 95(1) of the FA Administration Act provides the Respondent may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise, but only if subsection (2), (4A) or (4B) applies. Relevantly, section 95(2) of the FA Administration Act allows the Respondent to decide to write off a debt if:

    (a)the debt is irrecoverable at law; or

    (b)the debtor has no capacity to repay the debt; or

    (c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

    (d)it is not cost effective for the Commonwealth to take action to recover the debt.

26. Section 95(4) of the FA Administration Act provides that for the purposes of paragraph (2)(b), if a debt is recoverable by means of:

    (a)  deductions under section 84; or

    (aa)deductions under section 1231 of the Social Security Act 1991; or

    (b)  setting off under section 84A family assistance; or

    (c)  application of an income tax refund under section 87; or

    (d)  setting off under section 87A against a payment referred to in paragraph 82(2)(a);

    the person is taken to have capacity to repay the debt unless recovery by those means would cause the person severe financial hardship.

27. The term ‘severe financial hardship’ is not defined in the FAA Act however has been considered by the Tribunal in a number of cases in relation to section 97 of the FAA Act. 

28. In Jones and Secretary to the Department of Family and Community Services [2003] AATA 62 (22 January 2003) the Tribunal remarked:

    25. However, the Tribunal was also satisfied that s97 could not apply as the applicant has not established severe financial hardship. The family is struggling. The Tribunal accepts that, in reality, their financial situation is not significantly different, despite their salaries, from that of people who receive social security. However, the term severe financial hardship must be seen in the context of the legislation. With income of $50,000.00 being well in excess of income support payments under the Act, severe financial hardship is not shown.

29. In Klaverstyn and Secretary, Department of Family and Community Services [2—3] AATA 71 (24 January 2003) the Tribunal remarked:

    31. In my opinion it would not be useful to conduct a detailed analysis of the applicant's financial circumstances either at the time he appeared before the Social Security Appeals Tribunal or at the present time. There is no substantial difference in his position then and now. He owns a mobile home and furniture and he has nearly paid off a station wagon. He has no other assets. He owes a number of debts totalling about $2,450 which he is paying off. He has a disability support pension of $502.00 per fortnight and he keeps $85.00 out of the $165.00 per fortnight paid as his daughter's youth allowance. He allows her the balance of $80 for her personal expenses.

    32. He has no savings or cash reserves as his fortnightly expenses exceed his income. Like many people who are dependent on Commonwealth benefits he finds it difficult to make ends meet. He is substantially disabled with a spinal condition and it is unlikely that he will ever be able to secure paid employment. He does some volunteer work as a first aid instructor. In my opinion it will be difficult for him to repay the Commonwealth debt of $686.00, even at the rate of $30,00 per fortnight.

    33. However, difficulty is not the same as severe financial hardship. I am not persuaded that repaying the debt will cause the applicant to suffer severe financial hardship. Accordingly, even if I were satisfied that the debt was attributable to Commonwealth administrative error, the applicant would not have satisfied me that the debt should be waived under section 97.

30. The Respondent contends that the debt is not irrecoverable at law, and that the Applicant has capacity to repay the debt, noting that the Applicant does not receive a social security pension or allowance and has provided an income estimate of $110,915 for her husband’s earnings in the 2018/2019 financial year.  The Respondent further noted that the Applicant’s husband had adjustable taxable incomes of $98,401, $101,056 and $108,314 in the 2015/2016, 2016/2017 and 2017/2018 financial years respectively.[10] The Respondent contended that recovery of the debt would not cause the Applicant severe financial hardship given that:[11]

    (i)Repayment of the debt by instalments can be negotiated at an amount satisfactory to the Applicant and the Respondent; and

    (ii)The Applicant’s husband’s yearly earnings since 2015/2016 financial year are significantly in excess of the yearly annual rate of pension (relying on the decision in Re Lumsden and Secretary Department of Social Security (1986) 10 ALN N255).

    [10] Exhibit 3, Secretary’s Statement of Facts & Contentions, pages 7 and 8, paragraphs 32-35

    [11] Exhibit 3, Secretary’s Statement of Facts & Contentions, pages 7 and 8, paragraphs 31 and 34-35.

31. The Applicant provided a Statement of Financial Circumstances dated 25 July 2018 on which she provided details of her family financial circumstances both in the 2016/2017 financial year and at the time of completing the form.[12] The overall picture provided was that there was a fortnightly shortfall of approximately $220 at 25 July 2018.[13]

    [12] Exhibit 1, T Document, T22, pages 172-177, Statement of Financial Circumstances and Exhibit 8, Colour copy of the Applicant’s Statement of Financial Circumstances.

    [13] Exhibit 9, Extracted income and expenditure table prepared by the Respondent.

32. On cross-examination, the Applicant told the Tribunal that:

    ·     She has had no Centrelink assistance since 18 December 2017.

    ·     That her husband is still in full time employment and that they had over-estimated his 2018/2019 income to avoid a debt, she thinks it I more likely to be $105,000 for the year.

    ·     She had been in a payment arrangement with the Respondent, but was unsure whether it was for the 2016/2017 debt or the 2017/2018 debt.

    ·     She owns her own home and the mortgage repayments are up to date.

    ·     Her bills are up to date.

    ·     She has no credit cards.

    ·     The Statement of Financial Circumstances dated 25 July 2018 are not comparable to her current position, her expenses have increased. Her husband’s income is consistently somewhere between $100,000 and $105,000.

    ·     When it was pointed out that her expenses were more than income but she does not have a credit card, that they rely on her husband being able to do 1 overtime shift a fortnight to be able to pay all bills in the particular fortnight.

    ·     They can put food on the table, pay the mortgage, pay for private health, kindy, swimming lessons and some medical appointments.

    ·     Her husband can work and they can cover expenses mostly.

    ·     The shortfall had been around $330 a fortnight which amounted to her pregnancy management fee however they had just paid that, albeit late.

33. While I accept that the Applicant has in the past and may continue to face financial difficulty, it cannot be ignored that her annual family income exceeds $100,000 and overall her expenses are manageable.  Therefore, based on the evidence before the Tribunal, I am not satisfied that her situation amounts to severe financial hardship.

34. Based on the evidence before the Tribunal I am satisfied that the debt is recoverable at law, the Applicant has the capacity to repay the debt and doing so would not cause her severe financial hardship, her whereabouts are known and it is cost effective for the Commonwealth to take action to recover the debt.  Consequently, I find that the Applicant’s FTB debt cannot be written off pursuant to section 95 of the FA Administration Act.

    Should the Debt be waived due to sole administrative error pursuant to section 97 of the FA Administration Act?

35. Section 97 of the FA Administration Act provides that the Respondent 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 and the person would suffer severe financial hardship if it were not waived.

36. Selway J, in Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190 at paragraph [35] stated:

    The ordinary or usual interpretation of the phrase ‘attributable solely to’ is that it refers to the single or sole cause of the relevant act or event. The word ‘attributable’ means ‘capable of being attributed’. It involves an objective assessment of causation. The words ‘a debt attributable solely to an administrative error’ can be paraphrased as meaning that the only cause that objectively can be ascribed to the relevant debt is an administrative error.

37. The Respondent contends that there has been no operative error on the part of the Commonwealth in respect of the causation of the debt incurred by the Applicant during the 2016/2017 financial year.  Stating that specifically the debt has arisen because the Applicant’s estimate of her husband’s income was less than the amount he actually received in the 2016/2017 financial year.[14]

    [14] Exhibit 3, Secretary’s Statement of Facts & Contentions, page 9, paragraph 39.

38. The Respondent also contended that the repayment of the $4,142.75 FTB debt for the 2016/2017 financial year would not cause the Applicant severe financial hardship.[15]

    [15] Exhibit 3, Secretary’s Statement of Facts & Contentions, page 9, paragraph 40.

39. The Applicant told the Tribunal at the Hearing that she agreed that she was overpaid and accepted that the overpayment was not a result of an administrative error made by the Respondent.

40. Based on the evidence before the Tribunal, while I am satisfied that the Applicant received the amount of FTB in good faith, I am not satisfied that the Applicant’s FTB debt was a result of a sole administrative error. Consequently, I find that the Applicant’s FTB debt cannot be waived pursuant to section 97 of the FA Administration Act.

    Should the Debt be waived due to special circumstances pursuant to section 101 of the FA Administration Act?

41. Section 101 of the FA Administration Act provides that the Respondent may waive the right to recover all or part of a debt if they are 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 the family assistance law; 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.

42. The Act does not provide a definition of special circumstances, however the general proposition established by relevant Federal Court decisions make it clear that special means something different from the usual or ordinary.[16]

    [16] Groth v Secretary, Department of Social Security [1995] FCA 1708;  (1995) 40 ALD 541, at 545per Kiefel J; Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs v Jones(2012) 89 ATR 267;  [2012] FCA 639, at [51]; Boscolo v Secretary, Dept of Social Security[1999] FCA 106; (1999) 90 FCR 531, at [18]; Barker J in Kazmierczak v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs[2010] FCA 1084, at [37].

1. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 the Tribunal held at paragraph 3:

   An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition.  The qualifying adjective looks to 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. In Re Ivovic and Director-General of Social Services (1981) 3 ALN N95, the Tribunal stated:

   Whilst it would be unwise, if not impossible, to attempt to lay down any precise delineation of what may amount to “special circumstances” …., the use of the word “special” is, we think, intended to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case … In the exercise of the discretion …., the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the …. Act.

3. At Hearing the Applicant told the Tribunal that she agreed that she had been overpaid FTB for the 2016/2017 financial year however it was caused by circumstances outside her control which together with her family’s other hardships should constitute special circumstances.

4. The Applicant told the Tribunal that together with her husband they usually carefully monitor his income to ensure that they would not exceed the income estimate she provides to the Respondent, however in the 2016/2017 financial year her husband was paid unexpected bonuses by his employer for working additional shifts and for not taking leave. Prior to the financial year it was not possible to have foreseen the events that occurred with her husband’s employer.

5. The Applicant gave evidence of family circumstances that have caused both personal and financial hardships.  The Applicant told the Tribunal that:

   ·     She has had a 10-year battle with fertility and as a result they required the assistance of IVF to have children.  The IVF treatment was self-funded and that the failed attempts have been very difficult.  Both her and her husband are seeking counselling to help as a result.

   ·     Prior to the 2016/2017 financial year they would get a Medicare refund/rebate in relation to the cost of IVF however this had changed and she was not made aware of the change by her IVF provider.

   ·     She lost her mother in November 2014.

   ·     She has no family support network nearby.

   ·     Her two children have attended private kindy with no government assistance with the fees.

   ·     She continues to see a psychologist.

6. The Applicant’s evidence in relation to her financial situation is set out in paragraphs 31 to  32 above.

7. On cross-examination, the Applicant told the Tribunal:

   ·     That she was aware when providing her family income estimate that if their income exceeded $100,000 she would not be entitled to FTB and any overpayment would be recovered.

   ·     That by estimating her family income as $100,000 she was at the risk of going over however her husband kept a close eye on his earnings and his base salary was $80,000.

   ·     That to the best of her knowledge the Medicare rebate for IVF she was referring to was not a tax deduction to decrease income but was associated with the safety net.

   ·     She accepted that the changes to the Medicare safety net would have affected a lot of people not just her.

   ·     They were not aware of her husband’s extra income amounts until they got the tax statement.

   ·     Her youngest child has required a number of surgeries.

   ·     She places priority on both mental and physical health.

8. The Applicant contends that her situation is unique and while her family are not the lowest income earners overall she still has equally as challenging circumstances.

9. At Hearing the Respondent contended that the Applicant’s circumstances were not sufficiently out of the ordinary, such that they could be considered special for the purposes of section 101 of the FA Administration Act as:

   ·     The change to the Medicare rebate was not unique to the Applicant and would have had impacted on others.

   ·     The income cut off of $100,000 for FTB was a policy change and was not targeted at the Applicant personally.  This had impacted on others.

   ·     The Applicant accepted that she was on notice that changes in income could lead to a debt and while she was not aware that the extra payments were going to be made to her husband she put herself at risk of a FTB debt and did gain financially from the receipt of the bonuses.

   ·     While it is not disputed that the Applicant’s personal circumstances have been difficult, mental health issues are not unique.

   ·     The Applicant owns her own home, has no debts other than her mortgage, her husband had secure employment, they have top-cover private health, they can afford psychologist sessions, swimming lessons and her husband’s overtime allows them to meet their expenses.

10. The Respondent contends that when the Applicant’s personal circumstances are looked at as a whole they are not unique or special in a manner that would distinguish them from others.  Further there is no injustice in requiring the Applicant to repay the public monies she was not entitled to.

11. The Tribunal accepts that the debt did not result due to the Applicant knowingly making a false statement or representation or failing to comply with a provision of the family assistance law.  

12. The Tribunal accepts that the Applicant’s financial and personal hardships have been, and continue to be, difficult and empathises with the difficulty the Applicant faced in having to both experience and then disclose these circumstances. However, based on the evidence before the Tribunal set out above, in particular the Applicant’s current financial position, understanding of the FTB requirements and personal circumstances, I do not consider that the Applicant’s circumstances are sufficiently special or unusual to warrant the exercise of the discretion in section 101 of the FA Administration Act to waive the debt. Consequently, I find that the Applicant’s FTB debt cannot be waived pursuant to section 101 of the FA Administration Act.

    CONCLUSION

13. I find that the:

    (a)Applicant was paid more than her correct amount of family tax benefit during the 2016/2017 financial year;

    (b)Applicant’s family tax benefit debt for the 2016/2017 financial year is correctly calculated as $4,142.75 and is a debt owed to the Commonwealth;

    (c)Requirements of sections 95, 97 and 101 of the FA Administration Act are not met; and

    (d)Applicant’s family tax benefit debt is recoverable in full.

14. Accordingly, the decision under review is affirmed.

I certify that the preceding 56 (fifty-six) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell

..............................[SGD]...................................

Associate

Dated: 9 August 2019

Date of hearing:	17 July 2019
Applicant:	By telephone
Advocate for the Respondent:	Andrew Summers
Solicitors for the Respondent:	Department of Human Services