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

McKeown and Secretary, Department of Social Services (Social services second review) [2020] AATA 1525 (1 June 2020)
Division:GENERAL DIVISION
File Number(s): 2018/6188
Re:Kim McKeown
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Belinda Pola, Senior Member
Date:1 June 2020
Place:Brisbane

The decision under review is affirmed
...................[SGD]................................
Senior Member Belinda Pola
CATCHWORDS
SOCIAL SECURITY – Family Tax Benefit – FTB – calculation of correct entitlement - whether the debts are recoverable in part or full – no severe financial hardship - 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
Beadle and Director-General of Social Security (1984) 6 ALD 1
Lumsden and Secretary Department of Social Security [1986] AATA 228; (1986) 10 ALN N225
Secretary, Department of Social Security v Hales (1998) 82 FCR 154; 51 ALD 695
Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190
Timothy Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114
REASONS FOR DECISION
Belinda Pola, Senior Member
1 June 2020
BACKGROUND

The Applicant, Ms Kim McKeown, is the mother of two children and was in receipt of Family Tax Benefit (‘FTB’) in respect of her children on the basis that she had 100% care for the period of 3 May 2017 through to 19 December 2017 (or the ‘relevant period’).
The Department of Social Services (the ‘Department’ or the ‘Respondent’) sent notices to the Applicant, notifying them that the amount of FTB they received was on the basis that they had 100% care of their children, and that if this was not the case, that they should notify the Department if their circumstances changed. Notices were sent to the Applicant on 10 January 2017[1]; 13 October 2017[2]; 17 October 2017[3]; 31 October 2017[4]; 6 November 2017[5]; 16 November 2017[6] and 15 December 2017[7].
[1] Exhibit 1, T8, pages 43 to 45.
[2] Exhibit 1, T8, pages 49 to 51.
[3] Exhibit 1, T8, pages 52 to 54.
[4] Exhibit 1, T8, pages 55 to 57.
[5] Exhibit 1, T8, pages 58 to 60.
[6] Exhibit 1, T8, pages 61 to 63.
[7] Exhibit 1, T8, pages 64 to 66.
On 28 December 2017, the Department determined that from 3 May 2017 the Applicant had 50% care of her children[8]. On this basis the Applicant was overpaid FTB for the following periods:
(a)$1,164.07 for the period of 3 May 2017 through to 30 June 2017[9]; and
(b)$2,968.72 for the period of 1 July 2017 through to 19 December 2017[10].
[8] Exhibit 1, T6, pages 29 to 35.
[9] Exhibit 1, T5, page 23.
[10] Exhibit 1, T5, page 21.
The Applicant sought review of the decision by the Department regarding both the percentage of care that the Applicant had for their children and the subsequent debt, and this decision was affirmed by an Authorised Review Officer (‘ARO’) on 9 May 2018[11].
[11] Exhibit 1, T6, pages 29 to 35.
The Applicant applied for review of the decision by the ARO in relation to the percentage of care decision and subsequent debt. On 25 July 2018, the Social Services and Child Support Division (or ‘SSCSD’) of the Administrative Appeals Tribunal (or the ‘Tribunal’) affirmed the decision regarding the percentage of care the Applicant had provided her children, and the subsequent debt which was raised[12].
[12] Exhibit 1, T2, pages 3 to 5.
The Applicant applied to the Tribunal for a second review of this decision on 23 August 2018[13].
[13] Exhibit 1, T1, pages 1 to 2.
The Tribunal has already determined in the related proceeding (2018/4838), that the Applicant had care of her children on an equal basis during the relevant care period.
JURISDICTION
An ARO reviewed the Department’s decision on 9 May 2018. The SSCSD of the Tribunal reviewed the application and published a decision on 25 July 2018.
Section 128(1) of A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (or ‘Administration Act’), provides:
128 Application for AAT second review
(1) Application may be made to the AAT for review (AAT second review) of a decision made by the AAT under subsection 43(1) of the AAT Act on AAT first review.
In accordance with s128(1) of the Administration Act, the Tribunal has jurisdiction to hear this Application.
ISSUES
The Tribunal must review the application before it and determine:
(a)Whether the Applicant was paid more than their correct entitlement to FTB?
(b)And if so, whether the overpayments are debts that are recoverable in part or in full?
RELEVANT LEGISLATIVE PROVISIONS
A New Tax System (Family Assistance) Act 1999 (Cth) (the ‘Act’), sets out requirements regarding the calculation of FTB, including instances where there are shared care arrangements between parties.
In relation to FTB payments that are considered overpayments, a debt is due to the Commonwealth, s71(2) of the Administration Act provides:
71 Debts in respect of family assistance other than CCS, ACCS and family tax benefit advance
…
Overpayment
(2) If:
(a) an amount (the received amount) has been paid to a person by way of assistance; and
(b) the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;
the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.
Section 25 of the Administration Act places the obligation on the recipient of an FTB payment to report any changes in their circumstances, which provides:
25 Obligation to notify change of circumstances
(1) If, after a claimant becomes entitled to be paid family tax benefit by instalment:
(a) anything happens that causes the claimant to cease to be eligible for family tax benefit on the days for which the claimant will become entitled to be paid the benefit under the determination concerned, or to become eligible for a daily rate of family tax benefit that is less than that specified in the determination; or
(b) the claimant becomes aware that anything is likely to happen that will have that effect;
the claimant must, in the manner set out in a written notice given to the claimant under section 25A, as soon as practicable after the claimant becomes aware that the thing has happened or is likely to happen, notify the Secretary that it has happened or is likely to happen.
Penalty: Imprisonment for 6 months.
The Department (in most cases) sends letters to recipients from Centrelink, in accordance with section 25A of the Administration Act, which provides:
25A Secretary’s power to approve a manner of notification
(1) The Secretary must approve a manner of notification that a claimant is to use when notifying the Secretary of a thing under section 25.
(2) The Secretary must, by written notice, notify the claimant of the approved manner of notification.
CONSIDERATION
The Application was heard in Brisbane on 21 April 2020, with the Applicant (self-represented), and the Respondent represented by Ms Jasmine Forsyth, both appearing by telephone. The Tribunal considered oral submissions from both parties, in addition to submitted written evidence, as outlined in the Exhibit Register (Annexure 1).
(i) Whether the Applicant was paid more than their correct entitlement to FTB?
As it has already been determined that the Applicant did not have 100% of the care of their children for the relevant period, and instead had equal care of their children (or 50% of the care), the Applicant was in receipt of FTB during the relevant period which was more than what they were otherwise entitled to.
Submissions before the Tribunal contain calculations for the overpayment of FTB during the relevant period, and the resulting debt[14]. The resulting overpayment of FTB during the relevant period has created two debts relating to two financial years, ending 30 June 2017 and 30 June 2018:
(1) $1,164.07 for the period of 3 May 2017 through to 30 June 2017[15]; and
(2) $2,968.72 for the period of 1 July 2017 through to 19 December 2017[16].
[14] Exhibit 1, T4, pages 11 to 20; and T5, pages 21 to 28.
[15] Exhibit 1, T5, page 23.
[16] Exhibit 1, T5, page 21.
The Tribunal has reviewed these calculations and is satisfied the Applicant was paid more than their correct entitlement to FTB during the relevant period, and that this overpayment is a debt due to the Commonwealth in accordance with s71(2) of the Administration Act.
(ii) Whether the overpayments are debts that are recoverable in part or in full?
There are circumstances where the recovery of outstanding debts to the Commonwealth can be either written off or waived. Relevant to the Applicant’s legally recoverable debt, the Respondent may write off or waive the Applicant’s debt if the requirements set out in s95, s97, s101 of the Administration Act are met, or if severe financial hardship applies.
Write off debt (s95(4) of the Administration Act)?
Section 95 of the Administration Act allows the Respondent to possibly write-off or delay recovery of a debt for a period:
95 Secretary may write off debt
(1) The Secretary 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.
Secretary may write off debt if debt irrecoverable or debt will not be repaid etc.
(2) The Secretary may decide to write off a debt under subsection (1) 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.
(3) For the purposes of paragraph (2)(a), a debt is taken to be irrecoverable at law if, and only if:
(b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d) the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.
(4) 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(1)(c) (child care service payments);
the person is taken to have a capacity to repay the debt unless recovery by those means would cause the person severe financial hardship.
The Tribunal heard evidence from the Applicant that they had in fact already paid off their FTB debts[17]:
Respondent: Okay, all right. Now, your debt - those debt amounts, have they been recovered in full? Have you already paid them off?
Applicant:Yes.
Respondent: Okay. All right. You don’t have to pay anything back on those. Okay, all right?
Applicant:Yes.
[17] Transcript dated 21 April 2020, page 7, lines 1 to 6.
As the Applicant’s debt has been recovered in full, the Applicant does not satisfy the requirements of s95(1). Whether recovery of the payments has caused the Applicant severe financial hardship has been considered in detail below.
Severe Financial Hardship?
During the course of the hearing the Applicant claimed that they were in “financial hardship”[18]:
Applicant: I’ve been in financial hardship for the last few years, and apparently that was a funny joke on behalf of the father, because he has no proof of any of the time or any of the care where I do, and I keep a daily diary, have done for the last 20 years. My information and everything, all the school records, affidavits, the whole lot, and the whole lot is true to the best of my ability.
[18] Transcript dated 21 April 2020, page 5, lines 9 to 14.
The Tribunal heard evidence regarding the Applicant’s current financial circumstances. Under cross-examination it became clear, after deducting living expenses from their Disability Support Pension the Applicant was left more than $300 per fortnight[19]:
Respondent: So what I’ve got here, Ms McKeown - I’ve just gone through the maths, with what you’ve told me. You receive approximately $800 a fortnight. By the time rent and electricity is taken out, you’re left with $500. Then you’ve got $30 a fortnight for your car, $15 for your phone credit, $18 a fortnight for your doctor - your prescription medication - you’ve got $150 a fortnight for groceries and another $50 for meat. So, roughly, there’s about $337 left over per fortnight?
Applicant: Yes.
[19] Transcript dated 21 April 2020, page 7, lines 8 to 14.
The term “financial hardship” or “severe financial hardship” is not defined in the Act, however the Tribunal refers to the decision of Lumsden and Secretary Department of Social Security [1986] AATA 228; (1986) 10 ALN N225, where the Tribunal considered that for financial hardship to be established, a person’s entire financial position would need to be “materially less than the current rate of pension”.
Evidence before the Tribunal is that the Applicant’s financial needs are currently being met by her Disability Support Pension, with a modest amount of money set aside each fortnight. Further to this, the Applicant has confirmed to the Tribunal through their oral submissions that they have already paid the FTB debts relating this application.
The Tribunal finds that the Applicant is not in severe financial hardship as a result of the debts they have incurred from the overpayment of FTB.
The Tribunal finds that the Applicant has had the capacity to repay the debts, if payments were to be deducted from payments currently being made to the Applicant, pursuant to s95(4) of the Administration Act, this would not have resulted in the Applicant being in severe financial hardship.
Sole Administrative Error (s97 of the Administration Act)?
Subsection 97 of the Administration Act provides authority for a waiver to write off or recover debts that are attributable solely to administrative error made by the Commonwealth:
97 Waiver of debt arising from error
(1) The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.
(2) The Secretary must waive the administrative error proportion of a debt if:
(a) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and
(b) the person would suffer severe financial hardship if it were not waived.
3) The Secretary must waive the administrative error proportion of a debt if:
(a) the payment or payments were made in respect of the debtor’s eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and
(b) the debt is raised after the end of:
(i) the debtor’s next income year after the one in which the eligibility period or event occurs; or
(ii) the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;
whichever ends last; and
(c) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.
(4) For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.
The Tribunal refers to Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190, at paragraph 35, where the Full Federal Court observed:
“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.”
The Application before the Tribunal is a result of the Applicant receiving FTB payments during the relevant period which were more than what they were otherwise entitled to.
Based on the evidence before the Tribunal, it is clear the Applicant’s FTB debt was not raised as a result of sole administrative error, and this provision does not apply.
Special circumstances waver (s101 of the Administration Act)?
Section 101 of the Administration Act provides for the possibility to waive all or part of a debt on the grounds of special circumstances, which provides:
101 Waiver in special circumstances
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.
The Tribunal refers to Beadle and Director-General of Social Security (1984) 6 ALD 1, where the Tribunal at paragraph 12 observed:
“An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. 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.”
The Tribunal refers to Timothy Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114, where the Tribunal at paragraph 80 observed:
“…“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. Certainly, he did not know that his father was giving him his own money but the fact that he was deceived by his father does not mean that it is desirable to waive the debt. 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. His not knowing that his father had continued to receive the money does not take him outside the expectation that all social security recipients should repay money when they receive money but are not entitled to it. The system of administration of the SS Act does not visit any injustice for many if not all social security recipients but it did not lead to any injustice or unfairness on Mr Davy that is not visited, or potentially visited, upon all other recipients of social security payments under the Act. Therefore, I am not satisfied that there are special circumstances that make it desirable to waive the debt under s 1237AAD of the Act.”
The Tribunal refers to His Honour French J (as his Honour then was), in Secretary, Department of Social Security v Hales (1998) 82 FCR 154; 51 ALD 695, who stated:
“The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth.”

Based on the evidence before the Tribunal, the Tribunal does not consider the Applicant’s circumstances are sufficiently special or unusual to warrant the exercise of the discretion in s101 of the Administration Act to waive the Applicant’s debt, therefore the Applicant’s debt cannot be waived pursuant to s101 of the Administration Act.
CONCLUSION
The Tribunal finds that:
(i)the Applicant was paid more than the correct amount of FTB for the relevant period;
(ii)the resultant debt from the overpayment of FTB to the Applicant is a debt owed to the Commonwealth;
(iii)the Applicant does not meet the requirements of s95, s97 or s101 of the Administration Act in relation to their FTB debt for the relevant period, nor do they meet the requirements to qualify for severe financial hardship; and
(iv)the Applicant’s FTB debt is recoverable in full.
DECISION
40.
The decision under review is affirmed.

I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Senior Member Belinda Pola
………[SGD]…………
Associate
Dated: 1 June 2020
Date of hearing:  21 April 2020
Applicant:  Ms Kim McKeown
Respondent:  Represented by Ms Jasmine Forsyth
Senior Government Lawyer
‘Annexure 1 – Exhibit Register’

Exhibit

Number

Description

1

Section 37 T- Documents, received 26 September 2018, paged 1 to 71.

2

Respondent’s Statement of Facts Issues and Contentions including Authorities, dated 14 March 2019, pages 1 to 11.

[2020] AATA 1525

1 June 2020

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Appeal

Judicial Review

Remedies

Statutory Construction