Mitchell and Secretary, Department of Family and Community Services

[2006] AATA 851

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 851

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  N2006/0310

DIVISION		)
Re		DENISE MITCHELL

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal  Senior Member R. Hunt

Date 5 October 2006

Place Newcastle

Decision  The decision under review is affirmed.

[SGD]

Ms R. Hunt

Senior Member

CATCHWORDS

SOCIAL SECURITY – overpayment resulting in debt to Commonwealth –no administrative error – bad administration cause of debt - good faith – special circumstances.

LEGISLATION REFERRED TO

A New Tax System (Family Assistance) Act 1999

A New Tax System (Family Assistance Administration) Act 1999 – ss71, 71C, 95, 97 & 101

CASES REFERRED TO

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Beadle v Director General of Social Security 60 ALR 225

REASONS FOR DECISION

5 October 2006

Summary

1.               Mrs Mitchell applied for and received Family Tax Benefit and the Child Care Benefit in 2001. At the time of applying for both benefits, Mrs Mitchell was not in paid employment and her husband earned around $36,500 per annum. On returning to part time work in 2002 Mrs Mitchell informed Centrelink of her new income and of a modest increase to her husband’s wage.

2.               In June 2003 Mrs Mitchell’s entitlement to Family Tax Benefit and Child Care Benefit for 2002 was reconciled on the basis of her family’s combined taxable income. Centrelink calculated that Mrs Mitchell had been overpaid a total of $5005.94.

3.               After consideration of the evidence the tribunal has decided that unfortunately, although the family was placed in a very disadvantageous position, the debt cannot be waived as it was correctly calculated.

BACKGROUND

4.               

Mrs Mitchell was in receipt of the Family

Tax Benefit (FTB) and the Child Care Benefit (CB) from 2 July 2001. She incurred a debt to the Commonwealth after she returned to work and her income increased from her initial income estimate. She and her husband now are in the position of gradually repaying the debt to the Commonwealth. Mr Mitchell attended a tribunal hearing at which he explained the continuing burden this was placing on the family through no fault of their own.

5.               Centrelink’s payments to Mrs Mitchell of the FTB and CB were based on initial income estimates that  Mrs Mitchell provided to Centrelink on 2 July 2001. On that date, Mrs Mitchell reported an income of $nil for herself and $36,500 for her husband.

6.               On the same day as Mrs Mitchell provided Centrelink with estimates of her and her husband’s earnings, that is, 2 July 2001, Centrelink sent Mrs Mitchell two letters.  The first letter confirmed that expected earnings of $36,500 and nil were being used to calculate her family tax benefit payment of $248.08 per fortnight. The letter also set out that she should tell Centrelink if the combined family income fell below $37,000 or went above $77,234, or if her annual income went over $1,679. The second letter sent to Mrs Mitchell was about her CB. Centrelink notified Mrs Mitchell that the percentage assessment of 90.10% fee relief was based on a combined annual income of $36,500, and that Centrelink should be notified if the combined income was likely to change.

7.               In March 2002 Mrs Mitchell took a part time position after completing a course. She estimated her earnings for the 2001/2002 financial year at $10,000 and her husband’s at the increased amount of $38,000. On 11 March 2002 Mrs Mitchell telephoned Centrelink to change the estimates accordingly. Centrelink sent letters, both dated 11 March 2002, confirming changes to the ongoing family benefit rate and ongoing CB percentage to reflect the amended annual income. However, as later appeared, this was not the income Mrs Mitchell had disclosed on 11 March 2002.  

8.               In June 2003, the Australian Tax Office (ATO) notified Centrelink of Mrs Mitchell’s actual adjusted taxable income as $10,580 and her husband’s as $38,102. These amounts were only slightly above Mrs Mitchell’s March 2002 estimate. Centrelink then made a reconciliation calculating Mrs Mitchell’s correct entitlement to FTB and CB payments for the financial year. Centrelink advised Mrs Mitchell that she had received more FTB and CB than was appropriate. The result was Mrs Mitchell had unexpected debts of $3,745. 41 and $1,260.53.

9.               Mrs Mitchell asked that the decisions to recover the overpayment debts be reviewed. An authorised review officer nevertheless affirmed the decisions to recover the overpayments on 29 October 2003. The Social Security Appeals Tribunal (SSAT) followed suit on 28 February 2006.

Issue

10.              The issue for the tribunal was whether there were circumstances under which the Commonwealth should waive its rights to recover either, or both, of the overpayments. There was no issue as to whether Mrs Mitchell had incurred debts of $3,745.41 for FTB payments for the 2001/02 financial year and $1,260.53 for CB payments for the same period. Mrs Mitchell did not contest the accuracy of these calculations.

Consideration

11.              Mrs Mitchell’s husband, Mr Mitchell, appeared before the tribunal on behalf of his wife. He did not dispute the accuracy of the Centrelink calculations made in 2003 but argued that he and his wife should have been informed of the consequences of Mrs Mitchell’s return to work when she rang Centrelink in March 2002. If they had known the drastic effect this would have on their entitlements, Mrs Mitchell would not have returned to work. As well, if they had been made aware that the adjustment Centrelink made in March 2002 was not the final adjustment and that they would have to repay a large sum of money, Mrs Mitchell would have stayed at home with the baby.

12.               They had found this period very trying because Mr Mitchell had been travelling long hours to Sydney to work. Further, Mr Mitchell pointed out that his wife had worked for almost no return, having earned a little over $10,000, on which she paid tax, and in connection with which she incurred other costs such as petrol and parking. The whole exercise had left them exhausted and worse off financially with a debt they were still paying off three years later.

13.              The Secretary claims that, during Mrs Mitchell’s telephone call to Centrelink on 11 March 2002, the reconciliation process would have been explained to her. There is a reference on a file note, at T12, 56, that “the customer is satisfied with the estimate and has agreed to its use”. Mrs Mitchell does not dispute that, when she telephoned Centrelink, on 11 March 2002, to notify of the changes to the estimated annual income, she was aware that the income was being used to calculate her FTB and CB payments. However, Mr Mitchell gave evidence that they had no idea of their actual entitlement. Mr Mitchell gave evidence that he and his wife discussed the matter but they did not realise that, for the greater part of the year, the estimated annual income reported to them in March 2002 and that it would be calculated at the end of the year. Mr Mitchell gave sworn oral evidence that he and his wife had no idea that this was the case, especially when the payments were adjusted shortly after his wife’s phone call in March 2002. It was only after notification of the further adjustments and debts in 2003 that they became aware that the adjusted taxable income was not taken into account from March 2002 onwards.

14.              While they were aware of a reconciliation process, they were totally unaware of the probability of overpayment resulting when Mrs Mitchell made the decision to return to work. Mrs Mitchell notified Centrelink on 11 March 2002 precisely with the intent of avoiding any such consequence occurring. Mrs Mitchell fulfilled her obligations. Mr Mitchell argued they did not and could not foresee the possibility of a debt.

LEGAL BASIS OF DEBT

15.              The law applicable to this case is found in A New Tax System (Family Assistance) Act 1999 (the FA Act) and A New Tax System(Family Assistance) (Administration) Act 1999 (the Administration Act or FAA Act). Section 71(1)(a)(b) of the FAA Act states that, where a person has received a FTB payment to which he or she is not entitled, he or she has a debt to the Commonwealth. Similarly, section 71C of the FAA Act states that, where a person has received a CB payment to which he or she is not entitled, the person has a debt to the Commonwealth.

can the debt be written off?

16.              Under certain circumstances, the Commonwealth may waive its rights to recover debts under the Family Administration legislation. The relevant sections are ss 95, 97 and 101 of the Administration Act.    Mr Mitchell asked for consideration under these provisions.

17.              Section 95 of the Administration Act sets out that the Commonwealth may write off a debt if it is not recoverable at law, the debtor has no capacity to repay, or the debtor cannot be located. In my view, this provision does not assist Mrs Mitchell. In terms of the legislative provisions, I can see no impediment to the debts being recoverable at law although this is a harsh result. There is a debt, although there is no fault on the part of Mr and Mrs Mitchell. As well, Mrs Mitchell has demonstrated capacity to pay even though it is a financial strain. Arrangements are currently in place to repay the debts in instalments. According to a calculation made by Centrelink on 1 September 2006, Mrs Mitchell has already repaid the CB debt of $1,260.53. A FTB debt is still outstanding. Mrs Mitchell has reduced this FTB debt of $3745.41 to $1888.47.

administrative error, good faith and hardship

18.              Section 97 of the FAA Act states that, where a debt or part of the debt has been caused solely by administrative error, that proportion of the debt must be waived, provided the payment was received in good faith, and having to repay the debt will cause severe financial hardship. For all or part of the debt to be waived, all three of these elements must be present. Firstly, there must be an administrative error. In my view, while Mr and Mrs Mitchell have been the victims of poor administration, there has not been an administrative error on the part of the Commonwealth. The departmental practice, as I understand it, was to calculate the parents’ entitlements at the end of the financial year after receiving advice from the ATO. When Centrelink advised Mrs Mitchell of an adjustment in March 2002, this was not a final adjustment. Although it mislead Mr and Mrs Mitchell into thinking, quite reasonably, that their increased income had been taken into account in correcting the payments, no such final adjustment had been made. The final figures calculated in 2003 were the correct figures according to the information before me.

19.              I note that Mrs Mitchell received the overpayments in good faith and that this has caused the family hardship. Nevertheless, as she was the victim of poor administration rather than administrative error, section 97 cannot assist her claim.

special circumstances

20.              Section 101 of the FAA Act allows for the waiving of a debt where the debtor has not made a false statement, representation, or knowingly failed to comply with a provision of the family assistance law, and there are special circumstances, other than financial hardship alone, which make it desirable to waive the debt. Mrs Mitchell satisfies most of these requirements. Mrs Mitchell cannot be accused of ever making a false statement or representation. There is no suggestion that Mrs Mitchell failed to comply with a provision of family assistance law. She and Mr Mitchell have behaved in an exemplary manner and disclosed the increase in their income when appropriate.

21.              The remaining requirement for waiver of the debt is that there are special circumstances. The term "special circumstances" has been examined by courts and tribunals in many decisions and in several contexts. One commonly accepted explanation is set out in Re Beadle and Director-General of Social Security (1984) 6 ALD 1, where Toohey J stated:

“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 on 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.”

22.              The Federal Court on appeal found it was not possible to lay down precise limits or rules about special circumstances when considering the legislation before it in that matter see Beadle v Director General of Social Security 60 ALR 225.

23.              With regard to Mrs Mitchell’s decision to return to work in March 2002, despite her being unaware of the full consequences and being mislead into believing she was entitled to her continuing adjusted payments, this situation was not unusual or exceptional. Unfortunately, the Centrelink practice, of not adjusting payments until the end of the financial year, mislead a number of recipients of child and family payments into making the same mistake as Mr and Mrs Mitchell. This makes it difficult for Mrs Mitchell to establish a case for waiver of the debt.

24.              I take note that there are some differentiating circumstances in this case. Firstly, Centrelink did make a minor adjustment to Mrs Mitchell’s payments on 11 March 2002 following her phone call on that day notifying a new estimate of income. This lead Mr and Mrs Mitchell to believe their changed income had been taken into account. As well, I note that the letters from Centrelink advising Mrs Mitchell that she must report changes in income consistently referred to combined family income falling below $37,000 or if it “went above $77,234” or if Mrs Mitchell’s own annual income went over $1,679. The notifications do not spell out the effect of an increase in combined family income that is less than $77,234 and over $37,000. Mr and Mrs Mitchell did not ever have combined income that went above $77,234 when Mrs Mitchell inadvertently incurred her debts.

25.              Further, Mrs Mitchell’s income of $10,000 from her new job was almost totally obliterated by the Centrelink debt plus income tax and associated work expenses. Mr and Mrs Mitchell have not quantified these expenses but it is obvious that she would have been left with only a small return. I accept that Mrs Mitchell would have postponed her return to work had she realised that she and her husband were making all these sacrifices for such a small return and the prospect of continuing debt for the next several years.

26.              Mr and Mrs Mitchell have repaid a good part of the FTB overpayment and have cleared the CB overpayment. It was not easy for them to do this. Mr Mitchell explained that the earlier repayments were made through deduction from Mrs Mitchell’s Centrelink entitlements. Mr Mitchell further said the deductions form their payments had been a burden during a time when they badly needed the money. Now, as Mr Mitchell said in evidence and Centrelink confirmed, Mr and Mrs Mitchell are repaying the outstanding amount by way of a repayment card, at the rate of $85.20 per month. This is because they no longer receive entitlements from which repayments can be deducted and they have had to make other arrangements. Mr Mitchell gave further evidence to the effect that the repayments were making it hard to get ahead financially despite increased earnings.  

27.              Mr Mitchell furnished some details of the family’s yearly expenses and earnings to the tribunal. Mr Mitchell estimated, for 2006, expenses totalling over $67,226.00 which exceeded his family’s income of $66,872.00. In addition, the family experienced unusual veterinary expenses of approximately $3,500. Mr Mitchell explained at the hearing that the family dog was mauled by a neighbour’s dog and that this had created an additional expense. He and his wife took legal action in the local court and the matter had only recently settled.

28.              The figures Mr Mitchell produced to the tribunal of the family’s yearly expenses are as follows:

Type of Expense

Expense

Home Loan

$20,400.00

Electricity

$1,200.00

Rates

$1,000.00

Water

$660.00

Car Expenses

§  Petrol

§  Services

§  Regos

§  Greenslips

§  NRMA

§  Tyres etc

$4,680.00

$900.00

$650.00

$650.00

$200.00

$500.00

Phone + Fox

$1,680.00

Mobiles

$1,200.00

Haircuts

$600.00

Insurance

$2,040.00

Health Insurance

$1,560.00

Flexirent

$2,760.00

Day Care

$6,960.00

Food

$10,400.00

Clothes

$1,000.00

Ent/Extras/Bdays

$2,500.00

Sports

$1,250.00

Weight Watchers

$936.00

Visa Bill

$3,500.00

Total

$67,226.00

29.              An examination of the expenses borne by Mr and Mrs Mitchell shows that they have not been extravagant. In addition to the amounts set out in the table they initially met veterinary expenses and legal fees because of the attack on their dog. Although the case has since settled, they bore these additional expenses during the year. Furthermore, I note that Mr Mitchell gave oral evidence that the family had over-estimated their yearly income in an effort to avoid future CB and FTB debts. Mr Mitchell told the tribunal that the family had:

notified Centrelink of our income as being $100,000 for the financial year as a family.  That is a slight over-estimation but it is probably true to the mark by the end of the year, you know.  We hope to get pay rises throughout the year as most people do.

30.              This means they have foregone a possible entitlement in an effort to prevent any further debt arising. However, while I am sympathetic to Mr and Mrs Mitchell’s position, and consider these circumstances unfortunate and not due to any fault on Mr and Mrs Mitchell’s part, I am unable to conclude that the circumstances are so unusual, uncommon or exceptional as to activate s 101. I find, therefore, that there is no provision under the legislation which allows me to find that the debt should be waived.

31.              Mr and Mrs Mitchell were misled, because of the manner of late calculation and poor communication by Centrelink, into believing they were entitled to the money Mrs Mitchell received. They have carried the burden of this debt for over three years and are still experiencing the effects through no fault of their own. They have at all times acted in good faith. It is my understanding that Centrelink has, through an administrative scheme, from time to time forgiven some part of debts arising under adverse circumstances. This is a matter that Mr and Mrs Mitchell might pursue as it is not within the jurisdiction of the tribunal.

decision

32.              The decision under review is affirmed.

I certify that the 32  preceding paragraphs are a true copy of the reasons for the decision herein of  

Signed:         .....................................................................................
  Rhonda Pietrini        Associate

Date of Hearing  30 August 2006             
Date of Decision  5 October 2006
Solicitor for the Applicant          Applicant self-represented
Solicitor for the Respondent     Ken Bullock