Mills and Secretary to the Department of Family and Community Ser Vices
[2003] AATA 1140
•14 November 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 1140
ADMINISTRATIVE APPEALS TRIBUNAL Nº V2003/710
GENERAL ADMINISTRATIVE DIVISION
Re: GRAEME JAMES McDONALD MILLS
Applicant
And: SECRETARY TO THE
DEPARTMENT OF FAMILY ANDCOMMUNITY SERVICES
Respondent
DECISION
Tribunal: M.J. Carstairs, Member
Date: 14 November 2003
Place: Melbourne
Decision:The Tribunal affirms the decisions under review, namely that the applicant has a debt of parenting payment in the period 29 April 1999 to 17 July 2001 that should be recovered. As to the decision dealing with recovery by deductions from disability support pension, the Tribunal varies the decision to provide for recovery of the debt at $20 per fortnight for one year from the date of this decision.
(sgd) M.J. Carstairs
Member
SOCIAL SECURITY ‑ parenting payment ‑ overpayment ‑ recovery of debt ‑ waiver ‑ whether special circumstances ‑ rate of recovery
Social Security Act 1991 ss 1231, 1237AAD
Re Secretary, Department of Family and Community Services and Downes and Another
(2003) 70 ALD 100
McAuliffe v Secretary, Department of Social Security (1991) 23 ALD 284
Re Beadle and Director‑General of Social Security (1984) 6 ALD 1
Director-General of Social Services vHales (1983) 47 ALR 281
Groth v Secretary, Department of Social Security (1996) 40 ALD 541
REASONS FOR DECISION
14 November 2003 M.J. Carstairs, Member
1. This is an application by Graeme James McDonald Mills (the applicant) for review of a decision made by the Social Security Appeals Tribunal (the SSAT) on 5 June 2003. The SSAT affirmed decisions made by Centrelink delegates of the Secretary to the Department of Family and Community Services (the respondent), to raise and recover an overpayment of parenting payment to the applicant for the period 29 April 1999 to 17 July 2001. The SSAT decided that the debt should be recovered at the standard rate of deductions from ongoing pension payments.
2. At the hearing the applicant represented himself. Mr M. Todd, a Centrelink advocate, represented the respondent.
3. The Tribunal had before it the documents lodged under s37 of the Administrative Appeals Tribunal Act 1975, as well as an exhibit marked A1 for the applicant. The respondent’s Statement of Facts and Contentions was lodged on 7 October 2003.
BACKGROUND
4. The applicant was born on 5 August 1939. He ceased employment in 1998 and now receives disability support pension. Until his retirement, he was a partner in a business that installed domestic window blinds. In December 1998 the business went into liquidation. The applicant claimed parenting payment as he had the care of two of his children. In the claim for parenting payment dated 27 April 1999, the applicant failed to disclose that he was involved in a company and in a family trust. He also did not disclose certain other financial investments. The applicant was paid parenting payment from the date of the claim.
5. On 31 January 2001 a data match by Centrelink against records at the Australian Securities and Investments Commission and the Australian Taxation Office showed that the applicant was involved in a private trust or company. He then was asked to supply Trust Tax Returns for the McDonald Mills Family Trust (the family trust). The balance sheets for the family trust showed a loan to the applicant of $181,111 on 30 June 1998; a loan to the applicant of $191,053 (T8) in June 1999; and a loan to the applicant of $193,333 (later amended to $180,294) on 30 June 2000 (T9 and T18). As the assets value limit for a single home-owner claiming parenting payment was $125,750 when the applicant made his claim in early 1999, and had risen to $141,000 in July 2001, Centrelink made a decision on 18 July 2001 to cancel parenting payment because of the value of the loan as the applicant’s asset. The applicant asked for the cancellation decision to be reviewed. On 1 December 2001 the SSAT affirmed the decision to cancel the payment (T28).
6. On 2 November 2001, the trust was wound up and the house that the applicant was living in at North Balwyn was transferred from Martin and Edwards Blinds Pty Ltd, the trustee company for the family trust, to the applicant. In June 2002 Centrelink raised a debt for the period 29 April 1999 to 17 July 2001. The applicant later claimed and was granted disability support pension. Centrelink began recovering the debt from the applicant's fortnightly pension payment.
7. The applicant sought review of the decision to recover the debt. When the SSAT affirmed the decision the applicant sought review with this Tribunal. The issues before the Tribunal are whether the applicant has a debt and whether it should be recovered and if so, at what rate.
EVIDENCE
8. The applicant told the Tribunal that his circumstances at the time of the claim for parenting payment should be taken into account. He said that, after a successful career in business, strategies adopted by his business partner led to the business failing and the liquidation of the company. At the same time his marriage broke down leaving him with the care of his two school‑age daughters. At the age of fifty‑nine he found himself without employment, unlikely to obtain employment and with responsibility for the education of his daughters.
9. The applicant acknowledged that he did not complete the claim form for parenting payment correctly. He said that he had difficulty answering the questions and could get no assistance from Centrelink. He said that it took him about three weeks to complete the form. He could offer no explanation for answering “No” to the question asking whether he had a private trust. He said that he did not think about seeking the help of his accountant when he had difficulty with the questions. He attributed his wrong answers to his state of mind at the time, preoccupied with his marriage and business breakdowns. He acknowledged that he did not declare all his shares. He declared a half interest (jointly owned with his son) in property in Anglesea.
10. The applicant said that, if he had answered “Yes” to the question about the trust, and had then been told by Centrelink that he was not eligible for parenting payment, he could have taken steps to wind up the trust. He adopted this strategy when his daughter claimed youth allowance at the age of sixteen in 2000. He was told that youth allowance could not be paid because of the value of loans in the trust. The trust was wound up a year later, on 2 November 2001.
11. The applicant said that he did not set out to defraud Centrelink. He said that Centrelink should carry out its own checks on vital details. The applicant said that he now has nothing to show for his life. He has borrowed from his sister to pay his daughters’ school fees and the legal fees associated with the divorce proceedings in 2002. He still owes his sister $86,000. In the marriage settlement the applicant was required to pay his wife $163,000, as well as settling her debts. In order to pay these amounts the applicant sold the land at Anglesea in 2002 for more than $456,000. He said that he now has been assessed for capital gains tax on the sale of the Anglesea land and owed $30,720 to the Australian Taxation Office (Exhibit A1).
12. He has sold various shares in order to pay the mortgage on the Anglesea property and to purchase a cheaper car, having sold his previous car to assist in paying his daughters’ school fees. He said that he has used all his superannuation to pay for his daughters' education.
13. The applicant said that he has a bad back for which he takes painkillers. He also takes medication for diverticulitis and a cholesterol problem. However, he considers that his biggest problem is his mental state, although he does not consider that he needs help apart from taking sleeping tablets. One daughter, aged nineteen, lives with him, receives youth allowance and is undertaking tertiary studies.
CONSIDERATION OF THE ISSUES
14. The applicant did not dispute that the decision that the loan appearing on the balance sheets of the trust was to be assessed as an asset while the trust was in existence. The Tribunal notes that the applicant did not seek review of the decision made to that effect by the SSAT on 1 December 2001. Under s500Q(1) of the Social Security Act 1991 (the Act), parenting payment is not payable to a person if the value of the person’s assets exceeds the assets value limit.
15. During the period of the overpayment the applicant was a single homeowner. Even though the title of the house in which the applicant lived was held in the name of the trustee company, he is taken as a homeowner as defined in the Act because he had reasonable security of tenure in that home. The assets value limit for a single homeowner was $125,750 in early 1999, rising to $141,000 when his parenting payment was cancelled in July 2001. Section 1122 of the Act provides that the value of assets includes so much of an amount lent as remains unpaid. The Tribunal is satisfied that Centrelink was correct to treat as the applicant’s asset the balances of the loans as revealed in the income tax returns lodged for the family trust (Re Secretary, Department of Family and Community Services and Another and Downes (2003) 70 ALD 100). Therefore the Tribunal finds that at no time in the period that the applicant was paid parenting payment did the value outstanding on the loan fall below the assets limit.
16. Because of the effect of s500Q of the Act, parenting payment cannot be paid where the applicant's assets exceed the limit. Additionally, the applicant had assets during the period that included a car worth $20,000, and shares to the approximate value of $39,990. He also had a half-share in the property at Anglesea, which was increasing in value over the period, as reflected in its ultimate sale price in 2002 in excess of $456,000.
17. On the issue of whether the amount of parenting payment overpaid amounted to a debt, s1224 of the Act, then applicable, provided that if a person made a false statement (where untrue in fact is sufficient to be false (McAuliffe v Secretary, Department of Social Security (1991) 23 ALD 284)), then a debt would arise. The Tribunal is reasonably satisfied that when the applicant stated on the claim form that he had no interest in a trust, this was false, although the Tribunal accepts the applicant’s evidence that he did not intend to make a false statement. This means that there was a debt of parenting payment from the date of the claim until 1 July 2001. Section s1223(1) and s1223(5) of the Act as then in force also applied to create a debt in this period. After 1 July 2001, s1224 of the Act was repealed and a new s1223(1) was enacted. The Tribunal is satisfied that between 1 July 2001 and 17 July 2001 the overpayment is a debt under the Act, because s1223(1) provides that a debt arises where a person, for any reason, obtains the benefit of a payment to which they were not entitled.
18. With respect to recovery of the debt, s1236 of the Act provides that a debt may be written off, for a stated period or otherwise. However, the effect of s1236(1A) (1B) and (1C) is to allow a debt to be written off only if a person has no capacity to repay, or if it is not cost-effective for the Commonwealth to pursue the debt. This is not the case where a person is receiving a pension, especially as the effect of s1236(1C) is that a person is taken to have a capacity to repay, except where recovery through ongoing deductions from a pension would cause severe financial hardship.
19. Two summaries of the applicant’s financial circumstances were in evidence (T49, T50). These showed that his outgoings per month were less than his receipts, although he did not include an amount for expenditure on food in his summaries. The Tribunal concluded that if food and other necessities such as clothing are taken into account the applicant has no money left over each fortnight. At the time of the SSAT decision, the debt was being recovered at the standard rate of withholdings (that is 14% of pension or about $62.30 per fortnight). At the time of the hearing this had been reduced to $20 per fortnight. While the applicant's financial circumstances are difficult, and the Tribunal accepts that he has little discretionary spending, and no financial reserves to draw upon, the applicant is not in severe financial hardship, as that term is understood in the context of this legislation. He has ongoing pension payments and the ability to share household expenditures with his adult daughter who lives with him. Whilst the total amount that he owes is large, the greater part is owed to his sister and there was no evidence that she has made a demand for the payment.
20. In regard to the discretion to waive the debt on the basis of special circumstances, s1237AAD provides:
1237AAD. 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 false representation; or
(ii)failing or omitting to comply with a provision of this Act or the 1947 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.
21. The Tribunal accepts the applicant’s evidence that he did not knowingly make a false statement in answering questions on his claim for parenting payment in 1999, nor did he knowingly fail or omit to comply with the Act. Although it is unusual for someone to have the limited understanding that he professed when he has had such a successful business career, in giving evidence at the hearing in regard to a number of aspects of his financial affairs he showed that lack of knowledge. The Tribunal accepts that the trust and company structures were matters he left to his accountants and he did not understand them. The Tribunal accepts as honest his assertion that he did not intend to mislead in giving the answer incorrectly.
22. The special circumstances upon which the applicant relies include the financial and personal problems that he has endured with the failure of his marriage and business, and the level of debt that he now has, with limited ability to repay that debt. The debts owed to the applicant’s sister, the Australian Taxation Office and to the respondent total $138,175. The respondent submitted that the applicant had capacity to repay, and that his case did demonstrate any special circumstances that would justify waiving the debt. The respondent submitted that the withholdings should be restored to the standard rate, that is that they should be increased from the rate of $20 which is now being applied.
23. The Tribunal must consider all of the applicant's circumstances. However, the special circumstances where the Tribunal can exercise the discretion to waive the debt are limited. The circumstances must be unusual, uncommon or exceptional (Re Beadle and Director‑General of Social Security (1984) 6 ALD 1, Groth v Secretary, Department of Social Security (1996) 40 ALD 541, Secretary Department of Familyand Community Services v Chamberlain [2002] FCA 67). In Director‑General of Social Services v Hales (1983) 47 ALR 281 the Court set out the factors that must be taken into account in deciding whether the discretion should be exercised, including the fact that the applicant has received public moneys to which he was not entitled and also the circumstances in which the overpayment arose. The Tribunal did not accept the applicant’s submission that Centrelink had an obligation to make further enquiries into his circumstances.
24. The Tribunal considered the applicant's submission that he supplied information to Centrelink about the trust when his daughter applied for youth allowance in 2000. Whilst the daughter’s claim form was not in evidence before the Tribunal, the respondent did not dispute the truth of the applicant’s statement. However, the Tribunal decided that this did not warrant waiving that part of the debt in the period November 2000 to 17 July 2001. The information was not given in regard to his parenting payment, as is required under the Act. The Tribunal did not consider that providing the information in regard to his daughter’s payment should relieve him of responsibility for the overpayment of his own payment in that period, given that the applicant has a capacity to repay from his ongoing disability support pension payments.
25. When the overpayment was raised in June 2002, the applicant still had a half share in the Anglesea property and had not finalised the property settlement following the breakdown of his marriage. On his evidence he settled his affairs and sold the property at Anglesea towards the end of 2002, at which time he had knowledge of the parenting payment debt. The applicant gave only the most general evidence of the property settlement and disbursement of the funds. What is clear is that he now owns his own home, and while living frugally he is managing his outgoings including a modest repayment fortnightly to Centrelink. When all the circumstances are taken into account, including the way the debt arose, the applicant’s current financial circumstances, and his health the Tribunal decides that the circumstances do not have a sufficient quality of unusualness as to warrant the exercise of the discretion under s1237AAD of the Act.
26. A rate of withholding from ongoing pension may be determined under s1231 of the Act, and this was reviewed by the SSAT. The Tribunal notes that the Centrelink decision to recover at the standard rate took into account that the applicant retained a half share in the Anglesea property. This is no longer the case and the Tribunal considers that the current rate of withholdings of $20 per fortnight should remain in place for twelve months from the date of this decision. At that time the rate of recovery should be reviewed, taking into account the applicant’s circumstances.
DECISION
27. The Tribunal affirms the decisions under review, namely that the applicant has a debt of parenting payment in the period 29 April 1999 to 17 July 2001 that should be recovered. As to the decision dealing with recovery by deductions from disability support pension, the Tribunal varies the decision to provide for recovery of the debt at $20 per fortnight for one year from the date of this decision.
I certify that the twenty‑seven [27] preceding paragraphs are a true copy of the reasons for the decision of:
M.J. Carstairs, Member
(sgd) Catherine Thomas
Clerk
Date of hearing: 24 October 2003
Date of decision: 14 November 2003
Solicitor for applicant: Nil - self-representedAdvocate for respondent: Mr M. Todd, Centrelink
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