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

[2017] AATA 1413

McKeough and Secretary, Department of Social Services (Social services second review) [2017] AATA 1413 (7 September 2017)

Division:GENERAL DIVISION

File Number:           2016/2738

Re:Craig McKeough

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Senior Member A C Cotter

Date:7 September 2017

Place:Brisbane

The decision under review, as varied on 10 March 2017, is affirmed.

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

Senior Member A C Cotter

CATCHWORDS

DEBT RECOVERY – Family Tax Benefit – Rent Assistance – Schoolkids Bonus – whether overpayment – write off – waiver- whether sole administrative error – whether special circumstances – decision under review affirmed

LEGISLATION

A New Tax System (Family Assistance) Act 1999 (Cth) ss 25, 25A and Sch 1, ss 38B, 38C
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) ss 25, 71, 95, 96, 97, 101, 132.

CASES

Director-General of Social Services v Hales (1998) 82 FCR 154
Dranichnikov v Centrelink (2003) 75 ALD 134
Groth v Secretary, Department of Social Security [1995] FCA 1708
McKeough and Secretary, Department of Social Services & Anor [2016] AATA 855
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435
Re Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Re Secretary, Department of Family and Community Services and Jonauskas (2001) 65 ALD 553
Secretary, Department of Families, Community Services and Indigenous Affairs and Parker [2007] AATA 1834
Re Davy and Secretary Department of Employment and Workplace Relations (2007) 94 ALD 693

REASONS FOR DECISION

Senior Member A C Cotter

7 September 2017

BACKGROUND

1. Mr Craig McKeough is the separated parent of two children.

2. The Department of Human Services (“Department”) recorded Mr McKeough as having 35 percent care of the children with effect from 24 April 2011. On that basis, he received Family Tax Benefit (“FTB”).[1]

3. Because he had more than 14 percent care of the children, Mr McKeough also received rent assistance as a component of his FTB payment.[2] From May 2013, he claimed rent assistance in respect of a property at Vista Drive, Benowa, Queensland (“Vista Drive property”).[3]

4. In January 2014, another carer asked for a review of their FTB entitlement for the children from 1 January 2013. A further request for review was made in July 2015 in respect of the period from 1 January 2012.[4]

5. On 4 December 2015, a determination was made that Mr McKeough’s correct percentage of care for the children was 13 percent from 1 January 2012, based on the number of nights the children were actually in his care. Because of that determination, Mr McKeough was not entitled to receive FTB payments from 1 January 2012. Nor was he entitled to receive the Schoolkids Bonus from that date (eligibility for its receipt being dependent on the receipt of FTB). As a consequence, it was determined that he had been overpaid FTB and Schoolkids Bonus for the 2013 and 2014 financial years. The total amount overpaid was calculated to be $15,101.19.[5]

6. An Authorised Review Officer (“ARO”) reviewed the percentage of care determination in February 2016. That resulted in a variation, with the ARO finding that Mr McKeough’s percentage of care from 1 January 2012 was 18 percent.[6] That meant that the children were not Mr McKeough’s FTB children and he was not qualified for FTB. He did, however, again become eligible for rent assistance as the children were considered to be “regular care” children under s 25A of the A New Tax System (Family Assistance) Act 1999 (Cth) (“Family Assistance Act”). The practical result was that Mr McKeough was still considered to have been overpaid, but the amount of overpayment was reduced. The recalculated overpayment amount for the period 1 July 2012 to 25 November 2015 was $12,822.44.[7]

7. The decision with respect to percentage of care was affirmed by both the Social Services & Child Support Division (“SSCSD”) of this Tribunal,[8] as well as by the General Division of the Tribunal on a second tier review.[9]

8. Mr McKeough also sought a separate review of the decisions to raise debts against him in respect of the overpayments. Those decisions were subsequently affirmed by the SSCSD.[10] It is in respect of that decision that Mr McKeough brought the present application for review by the General Division of the Tribunal. Relevantly, during the course of the SSCSD hearing, Mr McKeough stated that he owned a house which he valued at approximately $960,000.00. He had an associated home loan of about $740,000.00.[11]

9. On 4 April 2016, the Department wrote to Mr McKeough, requesting that he contact it by 27 April for the purpose of providing information to ensure that he was receiving the correct payment.[12] No response was received.[13]

10. On 19 August 2016, the Department sent an Accommodation Certificate to Mr McKeough for completion and return by 9 September 2016.[14] The certificate was not returned.[15]

11. On 28 September 2016, an officer of the Department spoke by telephone with Mr McKeough, who said that he would be able to return the Accommodation Certificate by

    
    

    7 October 2016. He confirmed that he was living at the Vista Drive property and was the sole lease holder paying rent to Chevron Island Real Estate.[16]

12. As at 9 November 2016, the Accommodation Certificate was still to be returned. An officer of the Department spoke with Mr McKeough by telephone on that date. Mr McKeough confirmed that the total rent was $3,900.00 per calendar month ($900.00 per week), as stated in the copy of the tenancy agreement he previously provided in 2013. He said that his father paid $200.00 per week toward the rent and that $240.00 was paid by his

    
    

    (Mr McKeough junior) business, leaving a net rent amount of $460.00 per week to be paid by him.[17]

13. A search conducted by the Department with RP Data on 1 March 2017 revealed that

    
    

    Mr McKeough was in fact the owner of the Vista Drive property, having purchased it on

    
    

    8 April 2013 for $950,000.00. Settlement was effected on 12 December 2014.[18] A title search conducted the same day confirmed that Mr McKeough was the registered owner of the property from 15 December 2014.[19]

14. On 3 March 2017, the Department wrote to Mr McKeough, advising that it had determined that he was not entitled to rent assistance because he was an ineligible homeowner.[20] The Department subsequently advised Mr McKeough that he had been overpaid $1,612.52 in FTB for the 2011-2012 year,[21] $2,121.85 in FTB for the 2014-2015 year,[22] and $6,639.60 in rent assistance for the period 1 July 2015 to 1 March 2017.[23]

15. When those amounts are added to the existing overpayment amount of $12,822.44, referred to in paragraph 6 above, it is contended that Mr McKeough was overpaid a total amount of $23,196.41 for the period 1 January 2012 to 1 March 2017.[24]

    ISSUES FOR THE TRIBUNAL

16. Since the SSCSD’s decision in May last year and following Mr McKeough’s subsequent application for second tier review by the General Division, the relevant decision of the SSCSD was varied by an officer of the Department, to include the additional overpayment referred to in the preceding paragraph. Under s 132 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (“Administration Act”), the SSCSD is in such circumstances taken, on first review, to have varied the decision under review in the way in which the officer did. The application is then to be taken to be an application for second tier review by the Tribunal of the decision as varied.

17. Consequently, the issues which fall for my consideration are as follows:

    (a)whether Mr McKeough was overpaid amounts of FTB and Schoolkids Bonus in the amount of $23,196.41 from 1 January 2012 to 1 March 2017;

    (b)whether the overpayment is a debt due to the Commonwealth; and

    (c)if so, whether the debt is to be recovered.

18. I address those issues below.

    CONSIDERATION

    Was Mr McKeough overpaid amounts of FTB and Schoolkids Bonus?

19. At the hearing, Mr McKeough told me that although he continued to dispute the finding concerning the children’s percentage care, he accepted that the decision had been made and that the issue was over. While he admitted that he had not had 35 percent care of the children, he said that was due to circumstances beyond his control. In particular, he blamed the mother for repeatedly changing dates when the children were to be cared for by him and refusing their overnight stays with him.[25] This had a “roll on” effect on his attempt to meet the agreed percentage of care. 

20. Mr McKeough questioned the choice of 1 January 2012 as the start date for the overpayment calculation, pointing out that the then Federal Magistrates Court had  made orders to that effect in July 2012, some 15 months after the 35 percent sharing arrangement was recorded by the Department as having effect from 24 April 2011. He asked why the mother would have consented to the court orders if the earlier trial agreement recorded by the Department had not been adhered to.[26] He said that it was harsh and unreasonable to calculate overpayments dating back three or four years. Apart from those matters, he could not point to any error in the Department’s calculations, saying that he had not double-checked them.

21. While I understand Mr McKeough’s complaints concerning the care percentage, the difficulties he encountered in attempting to adhere to the agreed share arrangement, and the period selected for review of the children’s care arrangements, those are matters that more appropriately fell for consideration in the earlier application which was decided by Deputy President Molloy in October last year. They are beyond the scope of the present application for review. What is relevant, however, is Mr McKeough’s acknowledgement that the 35 percentage care was not met, as that has direct implications for his entitlement to FTB. 

22. As mentioned earlier, in its decision of 31 October 2016, the Tribunal affirmed the SSCSD’s decision that Mr McKeough had a care percentage of 18 percent in respect of the children from 1 January 2012.[27]

23. The consequence of that decision was that from 1 January 2012, the children ceased to be the FTB children of Mr McKeough. He was therefore not entitled to the payment of FTB.[28] As eligibility of the Schoolkids Bonus was dependent on the person receiving FTB, the decision also meant that Mr McKeough was not entitled to receive that payment from 1 January 2012.

24. The children were, however, considered to be “regular care” children of Mr McKeough because his care was more than 14 percent and less than 35 percent.[29] As such, Mr McKeough was entitled to the payment of rent assistance because a regular care child is a rent assistance child.[30] That remained the situation until Mr McKeough’s purchase of the Vista Drive property settled on 15 December 2014. On that date, he became not only the registered proprietor of the land, but also an “ineligible homeowner” under the Family Assistance Act. As a result, from that date his entitlement to receive rent assistance ended.[31]

25. In short, from 1 January 2012, Mr McKeough was paid FTB and Schoolkids Bonus to which he was not entitled. From 15 December 2014, he was paid rent assistance to which he was not entitled.

26. Mr McKeough did not point to any errors in the calculation of the overpayments. Having perused the Department’s calculation sheets, I am satisfied with the methodology it adopted for calculating the overpayments. Therefore, in the absence of any challenge as to the calculations, I find that Mr McKeough was overpaid an amount of $23,196.41 during the period from 1 January 2012 to 1 March 2017.

    Is the overpayment a debt due to the Commonwealth?

27. Section 71(1) of the Administration Act relevantly provides that if an amount has been paid to a person by way of, among others, FTB and Schoolkids Bonus, in respect of a period, and the person was not entitled to that assistance in respect of that period, the amount so paid is a debt due to the Commonwealth by that person.

28. As Mr McKeough was not entitled to FTB and Schoolkids Bonus from 1 January 2012 and was not entitled to rent assistance from 15 December 2014, I consider the amount of the overpayment, $23,196.41, is a debt due to the Commonwealth.

    Is the debt to be recovered?

    Write off of debt

29. The Secretary may, on behalf of the Commonwealth, decide to write off a debt for a stated period in particular circumstances. They include: where the debt is irrecoverable at law; where the debtor has no capacity to repay the debt; where the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate him or her; or where it is not cost effective for the Commonwealth to take action to recover the debt.[32]

30. There is no suggestion that any of these grounds are present in this case.

31. However, for the sake of completeness, I note that a debt is taken to be irrecoverable at law if, among other things, the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud.[33] Mr McKeough was declared bankrupt in November 2011 and was discharged in December 2014.[34] While Mr McKeough is a discharged bankrupt, it is clear that the debts in question were incurred after his bankruptcy.[35] Accordingly, this ground has no application in the present case.

32. It therefore follows from what I have said that there is no basis to write off the debt in this instance.

    Waiver of right to recover

33. Section 96 of the Administration Act provides that the Secretary may, on behalf of the Commonwealth, waive the Commonwealth’s right to recover the whole or part of a debt from a debtor, but only in certain specified circumstances. Of those circumstances, two are potentially relevant here: waiver of debt arising from error, and waiver in special circumstances.

    Administrative error

34. The Secretary is required to waive the right to recover the proportion of a debt that is attributable solely to administrative error made by the Commonwealth where the person received the overpayment in good faith and they would suffer severe financial hardship if recovery of the debt were not waived.[36]

35. There is no evidence of Commonwealth administrative error in the present case, let alone evidence that the debt was solely attributable to such error. I agree with the observation of Member Jensen in the SSCSD that the FTB debts were at least partly attributable to the conflicting evidence provided by the children’s parents concerning their care of the children.[37] I therefore do not consider that waiver on this ground is open.

    Special circumstances

36. Section 101 of the Administration Act concerns waiver in special circumstances. It provides:

    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 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.

37. This and similar provisions have been the subject of much consideration by the courts and the Tribunal over the years. It is unnecessary, for present purposes, to discuss those decisions in detail. However, there are a couple of observations which I should make.

38. First, paragraph (a) makes it clear that a prerequisite for the exercise of the waiver is that the debtor did not “knowingly” provide false information or “knowingly” fail to comply with their obligations under the relevant legislation. The term “knowingly” is not defined. However, the deliberate use of that word requires that there be some element of intent in making the representations or in the failure to comply with the legislation.[38]  

39. The term “special circumstances” is likewise not defined in the Administration Act. It has often been said that the expression looks to circumstances that are unusual, uncommon or exceptional, or which “have a particular quality of unusualness that permits them to be described as special”.[39] It requires something to distinguish the person’s case from others, “to take it out of the usual or ordinary case”.[40]

40. It has also been emphasised that, in exercising the discretion in a particular instance, the decision-maker must have regard to the legislative intent of the relevant Act:

    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.[41]

41. In that context, French J in Director-General of Social Services v Hales observed that the taxpayer is entitled to expect that, in the ordinary course, money paid to people which they are not entitled to will be recovered.[42] In a similar vein, Deputy President Forgie remarked in Re Davy and Secretary Department of Employment and Workplace Relations:

    The “special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances…that make it desirable to waive.” That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it…He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement…[43]

42. Returning to the present matter, I do not consider that s 101 has any application, since the prerequisite in paragraph (a) is not satisfied. That is because the debt resulted at least partially from Mr McKeough knowingly making a false statement or false representation, or knowingly failing or omitting to comply with a provision of the family assistance law.

43. At the hearing, Mr McKeough was taken to the Department’s notes of telephone conversations which Departmental officers had with him in September and November 2016. The note of the conversation on 28 September 2016 records that Mr McKeough phoned the Department on that day, presumably in response to a request that he phone relating to the outstanding Accommodation Certificate. He relevantly advised the officer that he:

    (a)would be able to return the certificate by 7 October;

    (b)lived at the Vista Drive property;

    (c)was the sole lease holder paying rent to Chevron Island Real Estate; and

    (d)was unable to discuss the matter further as he had to go, but he would return the certificate by the nominated date.

    The note of the conversation on 9 November recorded that Mr McKeough confirmed that the total rent was still $900.00 per week.[44]

44. During cross-examination, Mr McKeough admitted that what he had told the officers was untrue. He said that he knew it was wrong, but that he was caught “on the spot” and panicked. He also admitted having received rent assistance that he was not entitled to.

45. Mr McKeough’s statements to the officers concerning the lease of the property and the rental payable were clearly false. Given the opportunity to correct his original misstatement of 28 September, he failed to do so. Instead, he perpetuated the falsehood by confirming in the November phone conversation that the total rent was $900.00 per week.    

46. Further, Mr McKeough was at all times subject to an obligation to inform the Department of any change in circumstances that would cause him to cease being eligible for the payment of FTB.[45] Despite knowing that, as a homeowner, he was not entitled to rent assistance, he failed to notify the Department of his change in circumstances. I therefore find that he also knowingly failed to comply with a provision of the family assistance law.

1. It follows from what I have said that the prerequisite in paragraph (a) of s 101 is not satisfied and therefore, waiver for special circumstances is not available in this instance.

2. Even if I am wrong, and s 101 operates in this instance, I do not consider that Mr McKeough’s circumstances are so special as to make it desirable to waive the right to recover the debt.

3. Mr McKeough told me that he had been suffering depression for seven years. However, he produced no corroborating medical evidence from a psychiatrist or psychologist. He said that he had been demoted at work and that his income had reduced by some $25,000.00 in the 2016-2017 financial year. He had taken five months off work and was on a “final warning” from his employer.[46] His Statement of Financial Circumstances revealed a significant deficit of several thousand dollars between his monthly income and expenses. It also showed his equity in the Vista Drive property of approximately $160,000.00, although he said that might now be closer to $140,000.00.[47]

4. While I sympathise with Mr McKeough’s circumstances, I do not think they are so unusual, uncommon or exceptional compared with any number of recipients of family assistance. Given that he has received public money that he acknowledges that he was not entitled to, I do not believe that his circumstances make it desirable to waive his debt.

   Summary - Is the debt to be recovered?

5. To summarise, I do not consider there is any basis under the Administration Act to write off the debt in this instance. Nor do I believe that there is any justification to waive the right of recovery of the debt. The debt is therefore to be recovered.

   CONCLUSION

6. I consider that between 1 January 2012 and 1 March 2017 Mr McKeough received FTB (including rent assistance) and Schoolkids Bonus to which he was not entitled. As a result, he was overpaid an amount of $23,196.41, which is a debt owing to the Commonwealth. There is, in my opinion, no basis to warrant the write off of the debt or to waive the right to recover it. The debt is to be recovered from Mr McKeough.

7. Accordingly, the decision under review, as varied on 10 March 2017, is affirmed.

I certify that the preceding 53 (fifty -three) paragraphs are a true copy of the reasons for the decision herein of Senior Member A C Cotter

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

Associate

Dated: 7 September 2017

Date of hearing:	18 August 2017
Applicant:	In person
Solicitors for the Respondent:	Mr Christopher Bishop Mills Oakley Lawyers

Exhibit 1, T Documents, T 10, page 37, letter from Authorised Review Officer to Mr McKeough dated
4 February 2016.

[2] See A New Tax System (Family Assistance) Act 1999 (Cth), s 25A and Schedule 1, s 38B.

[3] Exhibit 2, Supplementary T Documents, S 1, pages 1-10, Rent Certificate dated 19 June 2013 and tenancy agreement dated 15 April 2013.

Exhibit 1, T Documents, T 10, page 37, letter from Authorised Review Officer to Mr McKeough dated
4 February 2016.

[5] Ibid, page 38.

[6] Ibid.

Exhibit 3, Secretary’s Statement of Issues, Facts and Contentions dated 17 March 2017, page 2, [12]. See also Exhibit 1, T Documents, T 8, page 31 and T 9, page 33, accounts payable letters to Mr McKeough dated 4 December 2015; Exhibit 2, Supplementary T Documents, S 3, page 14 and S 4, page 18, accounts payable letters to Mr McKeough dated 8 February 2016; S 5, page 22 and S 6, page 24, accounts payable letters to
Mr McKeough dated 9 February 2016; and S 18, pages 94-97, notes from Department’s mainframe.  

[8] See Exhibit 1, T Documents, T 2, page 4, decision and reasons for decision of the Social Services & Child Support Division dated 12 May 2016, [4].

[9] See McKeough and Secretary, Department of Social Services and Anor. [2016] AATA 855 (DP Molloy).

[10] Exhibit 1, T Documents, T 2, pages 3- 5, decision and reasons for decision of Social Services & Child Support Division dated 12 May 2016.

[11] Ibid, [8].

Exhibit 2, Supplementary T Documents, S 7, pages 26-27, Department’s letter to Mr McKeough dated
4 April 2016.

[13] Exhibit 2, Supplementary T Documents, S 18, page 98, Department’s file notes.

Exhibit 2, Supplementary T Documents, S 8, pages 28-31, Accommodation Certificate dated
19 August 2016.

[15] Exhibit 2, Supplementary T Documents, S 18, page 98, Department’s file notes.

[16] Ibid.

[17] Ibid.

[18] Exhibit 2, Supplementary T Documents, S 9, page 32, RP Data search dated 1 March 2017.

[19] Exhibit 2, Supplementary T Documents, S 10, page 34, title search dated 1 March 2017.

Exhibit 2, Supplementary T Documents, S 11, page 35, Department’s letter to Mr McKeough dated
3 March 2017.

Exhibit 2, Supplementary T Documents, S 14, pages 42-45, Department’s letter to Mr McKeough dated
9 March 2017.

Exhibit 2, Supplementary T Documents, S 15, pages 46-49, Department’s letter to Mr McKeough dated
10 March 2017.

[23]

Exhibit 2, Supplementary T Documents, S 13, page 41, Department’s letter to Mr McKeough dated
6 March 2017.

[24] Exhibit 3, Secretary’s Statement of Issues, Facts and Contentions dated 17 March 2017, [24] and Exhibit 2, Supplementary T Documents, S 17, page 53, Debt information dated 10 March 2017.

[25] Exhibit 6, email from Mr McKeough to the Tribunal dated 13 August 2017.

[26] Ibid.

[27] McKeough and Secretary, Department of Social Services & Anor [2016] AATA 855 (DP Molloy).

[28] See A New Tax System (Family Assistance) Act 1999 (Cth), s 25.

[29] Ibid, s 25A.

[30] Ibid, Schedule 1, s 38B (3).

[31] Ibid, s 38C (1).

[32] See A New Tax System (Family Assistance) (Administration) Act 1999 (Cth), s 95(1) and (2).

[33] See ibid, s 95(3)(c).

[34] See Exhibit 5, Mr Mc Keough’s Statement of Financial Circumstances dated 24 May 2017. 

[35] See also Secretary, Department of Families, Community Services and Indigenous Affairs and Parker [2007] AATA 1834, [23]. (SM Handley).

[36]A New Tax System (Family Assistance) (Administration) Act 1999 (Cth), s 97.

[37] Exhibit 1, T Documents, T 2, pages 4-5, decision and reasons for decision of Social Services & Child Support Division dated 12 May 2016, [7]. (Member P Jensen).

[38] See Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435, 445 [48] (DP Forgie); Re Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693, 714 [74] (DP Forgie) citing Re Secretary, Department of Family and Community Services and Jonauskas (2001) 65 ALD 553.

[39] See, for example, Re Beadle and Director-General of Social Security (1984) 6 ALD 1, 3 (Toohey J, Member Wilkins and Member Billings); and Dranichnikov v Centrelink (2003) 75 ALD 134, 148 (Hill J).

[40] Groth v Secretary, Department of Social Security [1995] FCA 1708, at page 7 (Kiefel J).

[41] Re Ivovic and Director-General of Social Services (1981) 3 ALN N95.

[42] (1998) 82 FCR 154,155.

[43] (2007) 94 ALD 693 [80].

[44] Exhibit 2, Supplementary T Documents, S 18, page 98, Department file notes.

[45] A New Tax System (Family Assistance) (Administration) Act 1999 (Cth), s 25.

[46] Exhibit 6, email from Mr McKeough to the Tribunal dated 13 August 2017.

[47] Exhibit 5, Mr McKeough’s Statement of Financial Circumstances dated 24 May 2017.