Milne and Secretary, Department of Education, Employment and Workplace Relations
[2010] AATA 1027
•17 December 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 1027
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/5567
GENERAL ADMINISTRATIVE DIVISION ) Re GRAHAM THOMAS MILNE Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Senior Member K Bean Date17 December 2010
PlaceAdelaide
Decision The tribunal:
(a) varies the decision under review so as to provide that the balance of the debt amount which is owing as at the date of this decision is to be written off pursuant to s 1236 of the Social Security Act 1991 on the grounds that Mr Milne has no capacity to repay the debt; and
(b) otherwise affirms the decision under review............................................
K BEAN
(Senior Member)
CATCHWORDS
SOCIAL SECURITY – Newstart allowance – Whether applicant unemployed – Applicant operating a business and not unemployed during relevant period – Whether grounds to waive or write off debt – No grounds to waive debt – But applicant currently has no capacity to repay debt – Balance of debt should be written off – Decision under review varied.
Social Security Act 1991 ss 593, 595, 1223, 1236, 1237AAD
Social Security (Administration) Act 1999
Secretary, Department of Employment and Workplace Relations v Joss (2006) 152 FCR 541
Re Secretary, Department of Education, Employment and Workplace Relations and Skarzynski [2008] AATA 1104
Re Polke and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 776
Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN 225Re Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729
REASONS FOR DECISION
17 December 2010 Senior Member K Bean introduction
1. The applicant, Mr Milne, has a large debt to the Commonwealth. The debt has been raised because Mr Milne received Newstart Allowance (NSA) during the period 20 December 2001 to 27 May 2003, when he was also operating a furniture business. Once the respondent became aware of that fact, a decision was reached that Mr Milne was not qualified for NSA during that period, as he was not unemployed, and therefore the amount of NSA he had received, being $16,595.64, constituted a debt owed by him to the Commonwealth.
2. Mr Milne sought review of that decision, first by an Authorised Review Officer (ARO) and then by the Social Security Appeals Tribunal (SSAT), but was unsuccessful on each occasion and on 10 November 2009 the SSAT decided to affirm the decision of the ARO, to raise and recover the debt[1].
[1] T2/3
3. Mr Milne has now sought review of that decision by this Tribunal.
issues
4. The issues for my determination therefore are:
(a)whether Mr Milne was qualified for NSA in the period 20 December 2001 to 27 May 2003;
(b)if not, whether Mr Milne was overpaid NSA in that period;
(c)if Mr Milne was overpaid NSA, whether the amount overpaid is a debt due to the Commonwealth; and
(d)if there is a debt to the Commonwealth, whether there any grounds upon which the debt should be waived or written off, in whole or in part.
5. I propose to address each of these issues in turn, having regard to the evidence before me and the arguments of the parties.
was mr milne qualified for nsa?
The law
6. The respondent contends that Mr Milne was not qualified for NSA as he was not “unemployed” during the relevant period. The respondent points to s 593 of the Social Security Act 1991 (the SS Act) in relation to qualification for NSA which relevantly provides as follows:
“593 Qualification for newstart allowance
(1)Subject to sections 596, 596A, 597 and 598, a person is qualified for a newstart allowance in respect of a period if:
(a) the person satisfies the Secretary that:
(i) throughout the period the person is unemployed; or
(ii)the person is a CDEP Scheme participant in respect of the period; and
…”
7. The term “unemployed” is not defined in the SS Act. However guidance for decision-makers in determining whether a person is unemployed for the purposes of this provision is contained in the Guide to Social Security Law, which relevantly provides as follows:
“3.2.2.40 Self-employment
Impact on qualification for NSA
A customer who is substantially involved in running a business would not normally be regarded as unemployed (1.1.U.30). It is irrelevant whether the business is being run at a profit or loss, or whether any income is currently being received.
A customer engaged in business can sometimes be regarded as unemployed if:
·the business is on a small scale and designed as a supplement rather than as an alternative to wages, OR
·the customer invests capital in the business, but not time and effort, OR
·the business is a contracting or sub-contracting enterprise.
In these cases, the customer needs to meet normal activity test (1.1.A.40) requirements and they must be willing and able to undertake any suitable work (1.1.S.410). Although spending a certain amount of time on odd jobs associated with their business would not preclude qualification for NSA.
Example: The time without work cannot be devoted to the overhaul of machinery or other activities related to self-employment.”
8. The meaning of the term “unemployed” in this context has also been considered in a number of Federal Court and Tribunal decisions. The most relevant recent Federal Court decision in which the meaning of the term “unemployed” in this context has been considered is Secretary, Department of Employment and Workplace Relations v Joss (2006) 152 FCR 541. In Re Secretary, Department of Education, Employment and Workplace Relations and Skarzynski [2008] AATA 1104, Deputy President Jarvis conveniently summarised the effect of Graham J’s decision in Joss as follows:
“36 … His Honour reviewed a number of earlier decisions of the Federal Court and of this tribunal. The following principles that have relevance to the issues arising in the present proceedings are stated in effect in, or may be deduced from, Graham J’s judgment or the authorities to which he referred.
(a) The word “unemployed” bears its colloquial or popular meaning of not being engaged in work of a remunerative nature.
(b) This meaning must, however, be modified to some extent in that the income test provisions of the SS Act recognise that some income may be earned by a person in receipt of newstart allowance resulting in the diminution of the allowance, but not rendering the person ineligible for it.
(c) Work of a remunerative nature encompasses not only the normal employer-employee relationship but also a person who is self-employed.
(d) A person may be employed even though his activities do not produce an income or profit.
(e) The question of whether a person is unemployed is a question of fact and degree, and regard should be had to the intensity with which the person applies himself or herself to particular work or a particular enterprise.”
9. Sub-section 595(1) of the SS Act also confers a discretion to treat a person as unemployed notwithstanding that he or she has undertaken paid work or another activity which would otherwise prevent them from being considered “unemployed”. That provision relevantly states as follows:
“595 Persons may be treated as unemployed
(1)The Secretary may treat a person as being unemployed throughout a period if:
(a) during the period, the person undertakes:
(i) paid work that, in the Secretary’s opinion, is suitable for the person to undertake; or
(ii) any other activity;
as a result of which he or she would, but for this subsection, not be taken to be unemployed; and
(b) the Secretary is of the opinion that, taking into account:
(i) the nature of the work or other activity; and
(ii) the duration of the work or other activity; and
(iii)any remuneration received for the work or other activity; and
(iv)any other matters relating to the work or other activity, or to the person’s circumstances, that the Secretary considers relevant;
the activity should be disregarded.”
10. The application of s 595(1)(b) was considered by Deputy President Hack in Re Polke and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 776 in which the Deputy President referred to the relevant Explanatory Memorandum and made certain observations in light of its content as follows:
“15. … The policy intent of the section was explained in this way in the Explanatory Memorandum to the Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Act 2005 (Cth):
‘Section 595 is concerned with the Secretary’s power to treat people as unemployed in certain circumstances. As a result of the Welfare to Work measures, some people who might previously have sought to claim either Parenting Payment or Disability Support Pension will now need to establish entitlement to other payments such as newstart allowance. One qualification criterion for newstart allowance is that the person must be unemployed. However, it is recognised that some people in the affected group will already be working to capacity or undertaking other appropriate activities, with the effect that they might not be correctly described as ‘unemployed’. Accordingly, new subsection 595(1) creates a power for the Secretary to treat a person as unemployed in the circumstances specified in proposed new subsection 595(1).’
16. The criteria in sub-paragraphs (i) to (iv) seem to me to run counter to the notion that full time employment of the nature engaged in by Mr Polke is the type of employment that ought be disregarded. Rather, they suggest that sporadic or intermittent work, or work on a week to week basis, might properly be disregarded. …”
The evidence
11. In his oral evidence, Mr Milne conceded that he was engaged in running a furniture business during the period identified by the respondent and also conceded that, contrary to what he had told the SSAT, he was engaged in conducting that business on approximately 12 days out of 14 in that period. He also conceded that he was operating a bank account in relation to this business, “East Montana” from 24 December 2000. However, he said that he was actively looking for work at the same time and said he was under the impression he could keep trading and seek employment at the same time and remain eligible for NSA. He said he made no money from the business and if he had done so, he would have relinquished his NSA. However, as he was making no money from the business, he needed to receive this in order to survive. He conceded that his main focus was on his business until it was clear this was not making any money. However, he said he had a computer in his shop which he used to look for work and he would also attend interviews when required. He also said in his evidence that if he had obtained a job he would have simply closed the shop and taken the job. At one stage in his evidence he conceded that he could not have done full-time work at that time, but said he would have done paid work if it was available.
12. The documentary material before me is largely consistent with Mr Milne’s evidence. This includes documents obtained from the Australian Customs Service indicating that Mr Milne imported goods on two occasions, one importation with a Customs value of $7,153.91 in August 2002, and the other with a total Customs value of $6,580.82, in December 2001[2]. Other recorded information indicates that the importations consisted of goods in the nature of furniture and similar items[3]. The material also includes statements of an account opened by Mr Milne, trading as “East Montana” relating to sales in the course of the business and recording merchant fees charged in the period 3 July 2002 through to 27 April 2003[4].
[2] T4/284
[3] T4/286-291
[4] T3/146-151
13. The material also includes a note made by a Centrelink employee dated 15 October 2004 and stating as follows:
“… Mr Milne did not bring in the copies of the leases for shops as requested, again discussed a shop rental of $375 per week and open 12 days out of 14. Shows major time and financial commitment to the business, plus he had gone offshore twice (December and July) to purchase more stock for the shop. …”[5]
[5] T3/83
14. The material also includes a signed statement made by Mr Milne dated 28 May 2003 as follows:
“I wish to advise Centrelink that I have been selling Javanese furniture trading as East Montana. I previously advised a Centrelink officer about these plans and I attended SEDS training. I have now been advised that this self-employment disqualifies me from receiving Newstart payments. I understand my payments will be cancelled and I may have an overpayment which must be repaid.”[6]
[6] T3/154
15. Subsequent to the hearing, Mr Milne also provided a letter addressed to him from the Australian Taxation Office (ATO) and confirming that the ATO had received non-lodgement advices for each of the financial years 2001, 2002 and 2003. This letter is consistent with Mr Milne’s evidence that he derived no income from the business he carried out during the relevant period.
Consideration
16. As discussed above, whilst the fact that the business operated by Mr Milne did not make a profit is a relevant consideration, it is clear on the authorities that a person may be considered not to be unemployed for the purposes of s 593, even when they derive no income from a business venture they are involved in. Where a person is actively involved in a business with a view to producing income, the critical question in determining whether they remain “unemployed” in the relevant sense is “the intensity with which a person applies him or herself … to a particular enterprise”[7]. However, as Graham J pointed out in Joss, once a conclusion is reached that a person is self-employed, it is “impossible to conclude that such a person was, at the same time, unemployed”[8].
[7] See [8] above.
[8] At [35]
17. Whilst I accept Mr Milne’s evidence that he did actively look for work whilst he was conducting his business, particularly during the latter part of the relevant period, it is nevertheless apparent from all of the material before me, including his evidence, that he applied himself to the business with some vigour and intensity, by his own admission spending at least some time in the shop on 12 days out of 14. Further, the business was actively trading during the relevant period, and Mr Milne travelled to Indonesia on two occasions during the period to buy furniture which he subsequently imported into Australia and sold or attempted to sell in his shop. Having regard to the nature and extent of Mr Milne’s engagement in his business during this period, I am satisfied that he was self-employed in conducting the business during the period 20 December 2001 to 27 May 2003 and further that this precludes a conclusion that he was also “unemployed” within the meaning of s 593.
18. As to the potential application of s 595, having regard to the terms of the Explanatory Memorandum referred to above and the criteria contained in the section, including the nature of Mr Milne’s business, the amount of time he spent engaged in the business and the duration of his involvement in the business, I am not satisfied that it would be appropriate to exercise the discretion conferred by s 595 so as to treat Mr Milne as having been unemployed during the relevant period.
19. As Mr Milne was not “unemployed” during the relevant period, it therefore follows that he was not qualified to receive NSA during that period.
was mr milne overpaid nsa?
20. Mr Milne received $16,595.64 in NSA between 20 December 2001 and 27 May 2003 and as he was not qualified for NSA during that period, it follows that he has been overpaid that amount.
what is the amount of the debt?
21. Section 1223 of the SS Act provides that an overpayment becomes a debt due to the Commonwealth. As I am satisfied that the overpayment amount has been correctly calculated, it therefore also follows that the overpayment amount of $16,595.64 is a debt due to the Commonwealth.
should the debt be waived or written off?
22. There are two provisions of the SS Act pursuant to which Mr Milne’s debt may be potentially waived or written off. Those provisions are ss 1236 and 1237AAD. I propose to consider the potential application of s 1237AAD first, and then s 1236.
Should the debt be waived?
23. Section 1237AAD of the SS Act allows for the waiver of all or part of a debt on the grounds of special circumstances and states as follows:
“1237AAD 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 this Act, the Administration 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.”
24. As will be apparent from the terms of the provision, before proceeding to consider the question of special circumstances, it is necessary to consider whether the debt arose in whole or in part from Mr Milne making a false statement or false representation or failing or omitting to comply with a provision of the SS Act or the Social Security (Administration) Act 1999.
25. I propose to consider first whether the debt arose in whole or in part from Mr Milne’s knowingly making a false statement or false representation.
26. During the relevant period, whilst he was in receipt of NSA, Mr Milne was required to lodge claim forms with Centrelink each fortnight. Some of these forms have been reproduced in the T documents and on each of the forms of which copies have been provided, Mr Milne was asked to indicate whether he had done any work in the preceding fortnight, including self-employment. On each occasion, Mr Milne ticked the box indicating “no”[9]. On various dates, Mr Milne also completed customer declaration forms including a declaration “I am unemployed (i.e. not employed full-time)”[10]. In his evidence, Mr Milne also acknowledged that he was aware at the relevant time (i.e. between December 2001 and May 2003) that he was required to tell Centrelink if he started a business.
[9] T3/180-187
[10] T3/170
27. In these circumstances, I am satisfied that Mr Milne was aware that he was required to tell Centrelink about his business, East Montana, but chose not to do so as he felt he needed to receive NSA whilst he attempted to establish the business. Whilst Mr Milne claimed before the SSAT that Centrelink was aware of the business, he did not repeat that claim before me and in any event I note there is no material before me to establish that Centrelink was aware at the time that Mr Milne was
operating the business East Montana between December 2001 and 27 May 2003.
28. It follows that I consider that the debt owed by Mr Milne did arise wholly or partly from his knowingly making a false statement or representation, namely that he was unemployed. In those circumstances, the pre-conditions for the exercise of the discretion contained in s 1237AAD are not met and it is not necessary for me to proceed to consider whether there are “special circumstances” in the relevant sense.
Should the debt be written off?
29. Section 1236 of the SS Act provides as follows:
“1236 Secretary may write off debt
(1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
(1A)The Secretary may decide to write off a debt under subsection (1) if, and only 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.
(1B)For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(a)the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in section 1231, 1232 or 1233 has elapsed; or
(aa)the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance) (Administration) Act 1999 has elapsed; or
(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.
(1C)For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a) deductions from the debtor’s social security payment; or
(b)deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or
(c) setting off under section 84A of that Act;
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
(2) A decision made under subsection (1) takes effect:
(a)if no day is specified in the decision—on the day on which the decision is made; or
(b)if a day is specified in the decision—on the day so specified (whether that day is before, after or on the day on which the decision is made).
(3)Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.”
30. Of the circumstances referred to in this section, the only one which is potentially applicable to Mr Milne is that he has no capacity to repay the debt on the basis that deductions from his social security payments will result in his being in severe financial hardship pursuant to s 1236(1C).
31. The term “severe financial hardship” is not defined in the SS Act. However, in Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN 225, the Tribunal found that for this requirement to be satisfied a person’s entire financial position would need to be materially less than the current rate of pension. In Re Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729, the Tribunal also observed:
“Severe financial hardship, while not implying destitution, goes beyond straitened financial circumstances and imports a need for the particular case of a person to include financial suffering of a severe or extreme nature.”
32. There is no doubt on the material before me that Mr Milne is currently in an extremely difficult financial position. His evidence, which I accept, is that he currently receives income (by way of social security payments) of $660 per fortnight from which he pays, or is liable to pay, the following:
Rent $500
Gas and electricity $46
Gym membership $35
Debt owed to GE Finance $20
Debt owed to David Jones $20
No interest loan (NIL) $30
Volleyball $30
Centrelink $20
Child support $13.65
Food $200
Foxtel $38.30
Car expenses $82
Phone $72
Total $1,106.95
33. After deduction of these expenses from his income, Mr Milne is left with a deficit of $446.95 per fortnight, such that his financial situation is rapidly deteriorating even further.
34. By way of explanation of some of these expenses, Mr Milne said that he plays volleyball with his 15 year old son and pays for his son to participate in this as it gives him an opportunity to spend time with his son. He also explained that he currently has two phones so that if one gets cut off he can use the other one and the second phone costs him $19 per month. In relation to his debts owed to GE Finance and David Jones, he said that he was not currently paying either of these debts, although he was still negotiating to try and resolve them. He said he owes David Jones between $3,000-4,000 and the material before me suggests he owes a similar amount to GE Finance. In relation to his Foxtel bill, he explained that he had tried to terminate his Foxtel service, but unfortunately he was locked into a fixed term contract and so remained liable for this amount until the contract expired. In relation to his gym membership, he explained that he had a membership with the club “Next Generation” in North Adelaide and this was the one “luxury” which he allowed himself as it allowed him to keep fit and helped him to manage stress.
35. As to expenditure on discretionary items more generally, he said he had not bought a bottle of beer for 6 months and had holes in his shoes because he cannot afford to buy new ones. In relation to his circumstances more generally, he commented that he did not know anyone “doing it tougher” than him other than those “on the street”. He said he had somewhere to stay for the next three months but was not sure what he would do after that. He said he was constantly running out of petrol as he did not have the funds to buy as much petrol as he needed.
36. At the hearing, Ms Odgers for the respondent submitted that some of Mr Milne’s expenses were discretionary and therefore it could not be said that making payments of $20 per fortnight towards his debt was causing Mr Milne severe financial hardship. She pointed in particular to Mr Milne’s expenses associated with volleyball and the fact that he pays $19 per month for a second phone, only slightly more than the amount of his debt. She also made reference to his gym expenses and queried the accuracy of the amount he had indicated was spent on car expenses. She also pointed out that Mr Milne’s NIL debt would soon be paid off.
37. In light of these submissions, I enquired of Ms Odgers as to whether, if the discretionary amounts she had referred to were excluded and Mr Milne was still in a negative financial position, the respondent would concede that he is suffering severe financial hardship. She indicated that in those circumstances the respondent would concede the issue of severe financial hardship.
38. Taking that approach to assessing Mr Milne’s financial position yields the result that from the $660 he receives each fortnight, he is liable for the following expenses, excluding the discretionary items referred to above (including all of his car expenses and the expenses associated with his second phone):
Rent $500
Gas and electricity $46
GE Finance $20
David Jones $20
NIL $30
Centrelink $20
Food $200
Foxtel $38.30
Phone $64
Child support $13.65
Total $951.95
39. It is accordingly apparent that even excluding all of the discretionary items alluded to by Ms Odgers, Mr Milne is in a negative and steadily deteriorating financial situation and that his overall financial situation is extremely precarious. In fact even if his NIL debt and his debts to GE Finance and David Jones are also excluded, there is still a deficit of approximately $220.00 per fortnight between his fortnightly income and expenditure. As alluded to above, he has indicated that whilst he has accommodation for the next three months, he currently owes $500 in rent and is unsure what he will do once his current accommodation is no longer available.
40. In these circumstances, I consider that Ms Odgers’ concession that if Mr Milne remained in a negative financial position once all discretionary items were excluded, then he should be considered to be suffering severe financial hardship, was properly made. Further, whilst his debt to Centrelink is only one contributor to the extremely difficult financial situation Mr Milne finds himself in, I consider that it makes a significant enough contribution such that it can be said that recovery of the amount which is currently being recovered is resulting in severe financial hardship for Mr Milne. I am also satisfied that ongoing recovery of the debt by deductions from Mr Milne’s social security payments will continue to result in severe financial hardship for him and that he currently has no capacity to repay the debt.
41. Furthermore, Mr Milne is currently 62 years old and, although he spoke of plans to start a business importing pizza boxes, on the material before me, there is no realistic prospect of any significant improvement in his financial situation in the foreseeable future. I accordingly consider that the balance of the debt owed by Mr Milne should be written off pursuant to s 1236 of the SS Act. I note that the write off of a debt is not equivalent to waiver and does not prevent action being taken in the future to attempt to recover the debt, should it become apparent that the debt has become recoverable, in whole or in part.
conclusion
42. For the reasons given above, I have concluded that Mr Milne was not qualified for NSA in the period 20 December 2001 to 27 May 2003, and that he has accordingly been overpaid the amount of $16,595.64 which constitutes a debt due to the Commonwealth. However, I have also concluded that the amount of that debt which is still owing should be written off pursuant to s 1236 of the SS Act on the grounds that Mr Milne currently has no capacity to repay the debt.
decision
43. The tribunal:
(a) varies the decision under review so as to provide that the balance of the debt amount which is owing as at the date of this decision is to be written off pursuant to s 1236 of the Social Security Act 1991 on the grounds that Mr Milne has no capacity to repay the debt; and
(b) otherwise affirms the decision under review.
I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member K Bean
Signed: ...............J Coulthard......................................
AssociateDate of Hearing 12 October 2010
Date of Decision 17 December 2010
Advocate for the Applicant Self-representedAdvocate for the Respondent Ms L Odgers
Centrelink Advocacy Branch
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