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

[2018] AATA 2003

MZNK and Secretary, Department of Social Services (Social services second review) [2018] AATA 2003 (2 July 2018)

Division:GENERAL DIVISION

File Number(s):      2017/3485; 2017/3486

Re:MZNK  

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Dr I Alexander, Member

Date:2 July 2018

Place:Sydney

The decision under review is set aside and the matter is remitted to the Respondent for reconsideration.

…………[SGD]…………

Dr I Alexander, Member

CATCHWORDS

Social Security – Centrelink – Parenting payment debt – Austudy payment debt – Whether there is any basis in law to write off or waive the Applicant’s Centrelink debt – Whether a proportion of the Applicant’s Centrelink debt can be attributed to administrative error by Centrelink – Severe financial hardship – Special circumstances – Administrative error – Decision under review remitted for reconsideration

LEGISLATION

Social Security Act 1991

REASONS FOR DECISION

Dr I Alexander, Member

2 July 2018

BACKGROUND

1. On 10 October 2000, MZNK’s ex-husband sustained a workplace injury that was the subject of a worker’s compensation claim.

2. From 10 April 2007 to 17 December 2008, MZNK (the Applicant) was in receipt of parenting payment, partnered.

3. From 12 December 2008 to 20 March 2013, the Applicant was in receipt of Austudy payment.

4. On 10 August 2013, Centrelink decided to raise and recover a parenting payment debt of $2,360.77 for the period from 28 April 2008 to 16 December 2008, on the basis that the correct amount of the Applicant’s ex-husband’s compensation payments had not been taken into account.

5. On 15 August 2013, Centrelink decided to raise and recover an Austudy payment debt of $29,693.76 for the period from 12 December 2008 to 19 March 2013, on the basis that the correct amount of the Applicant’s ex-husband’s compensation payments had not been taken into account.

6. On 11 February 2014, an Authorised Review Officer (ARO) varied these decisions and found that the Applicant had a parenting payment debt of $3,923.09 and an Austudy payment debt of $32,262.02.

7. On 11 July 2014, the former Social Security Appeals Tribunal (SSAT) affirmed the ARO’s decision.

8. On 26 June 2014, the Applicant and her husband separated and subsequently divorced on 6 June 2016.

9. The Applicant’s debt is being repaid at a rate of $20 per fortnight which is being withheld from her current family assistance payments.

10. On 13 June 2017, the Applicant lodged an Application for Second Review of the SSAT’s decision.

11. On 20 October 2017, following a written application by the Applicant, the Tribunal granted an extension of time for making an application for review of the decision to 15 June 2017.

12. In this proceeding, in which she was self-represented, the Applicant seeks review of the decision of the SSAT.

    ISSUES

13. There is no dispute that the correct amount of the Applicant’s ex-husband’s compensation payments was not taken into account when the Applicant received her parenting and Austudy payments during the specified times.

14. There is also no dispute that the debt, as stated by the ARO on 11 February 2014, was correctly calculated and that the Applicant was not qualified for the payments.

15. Sections 1236, 1237A and 1237AAD of the Social Security Act 1991 (the Act) provide for circumstances in which the Secretary may write off or waive a debt.

16. The Applicant contends that the debt should be written off or waived on the basis that the difficult relationship with her then husband constituted “special circumstances” and that currently she is suffering severe financial hardship.

17. Therefore, the issue before the Tribunal is whether there is any basis in law to write off or waive the Applicant’s debt.

    THE APPLICANT’S EVIDENCE

18. In a written statement dated 14 February 2018, the Applicant stated that during her 16 years of marriage, she and her children suffered significant domestic violence with physical, emotional and financial abuse.

19. She stated that whenever she attended Centrelink she was always accompanied by her husband who, without showing her, filled out all forms and provided all information about his income.

20. She stated that she is now a single parent with three children, is no longer able to work full-time because of mental health issues and is in financial hardship because she has to pay a mortgage and legal fees in respect of a continuing Family Court matter.

21. At the hearing, the Applicant told the Tribunal that she continues to live in the family home with her three children – the youngest of whom is still at school.

22. The 3 bedroom house was purchased in 2009 by her ex-husband, with him as the sole owner. The property settlement with regard to the house is still in dispute with a hearing scheduled in the Family Court in September 2018.

23. Since the separation from her husband, on advice from her solicitor, the Applicant has continued to pay the mortgage at a rate of approximately $1,200 per month (approximately $14,400 per year) with no contribution by her ex-husband. The residual mortgage is approximately $185,000. She is also repaying legal fees of $7,000 by instalments.

24. The Applicant told the Tribunal that her ex-husband’s compensation payments were paid into his own bank account and that she had no access to any statements and was not informed as to how much he was being paid. Also, the Applicant’s ex-husband was solely responsible for any advice provided to Centrelink with respect to these payments.

25. The Applicant said that she was not aware of any possible debt until about 2012 when her ex-husband told her that his accountant had informed him that Centrelink will be raising a debt in respect of her social security payments.

    SECTION 1236 – “WRITE OFF”

26. Subsection 1236(1) of the Act states that “Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.”

27. Subsection 1236(1A) of the Act states that:  

    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.         

28. For present purposes, the relevant question is whether the Applicant has “no capacity to repay the debt”.

29. The Respondent contends that the Applicant does have the capacity to repay the debt and is currently doing so at a rate of $20 dollars per fortnight, withheld from her family assistance payments.

30. The Applicant submits that she is in “severe financial hardship” and therefore the debt should be written off.

31. Subsection 1236(1C) of the Act states that:

    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.

32. Documents provided to Tribunal indicate that the Applicant’s approximate current annual income is as follows:

    Newstart Allowance:                $15,703

    Family Assistance payments:             $8,320

    Child Maintenance:                 $4,390

    Family Tax benefit deduction:  -$520

    Approximate Annual income:   $27,893

    Consideration

33. The evidence before the Tribunal, in my view, demonstrates that the Applicant does have the capacity to repay the debt with a deduction from her social security payments.

34. I accept that the evidence also shows that the Applicant’s circumstances are difficult and that she suffers financial hardship.

35. However, in my reading of subsection 1236(1C) of the Act, there is a requirement for the recovery of the debt to have causal relationship between the recovery of the debt and “severe financial hardship”.

36. In my view, the evidence does not support a conclusion that the $20 per fortnight deduction from the Applicant’s Family Tax Benefit would result in her being in “severe financial hardship”.

37. Therefore, I am satisfied that there are no grounds for the debt to be written off pursuant to section 1236 of the Act.

    SECTION 1237A – “ADMINISTRATIVE ERROR”

38. The Applicant contends that a proportion of the debt should be waived because Centrelink had not acted sooner with regard to the apparent failure of notification with respect to changes in her ex-husband’s compensation payments. She stated that it was unfair that she is required to repay the debt because her ex-husband had his own bank account and controlled his own money. She denied knowledge as to the amount of compensation payments received by her ex-husband as well as the advice given to Centrelink.

39. The Respondent contends that the Applicant was sent numerous notices over the debt period which stated that Centrelink must be informed within a specified time about any changes in circumstances that may affect her payments.

40. At this point, it is relevant to consider the circumstances which led to the raising of the debt.

41. Centrelink records show that on 20 December 2011, following a “matching exercise” with respect to the financial year 2008/2009, a discrepancy between the Applicant’s ex-husband’s income declared to the Australian Tax Office (ATO) [$36,023] and to Centrelink [$26,305] was identified. 

42. On 23 January 2012, a Data-matching Program review was started with a request for further information.

43. An annotation to the review dated 24 April 2012 noted that there had been no compensation updates since 10 September 2008. When the Applicant’s ex-husband was contacted he advised that he was still receiving workers compensation payments and was asked to confirm “rate paid/payable” from 10 September 2008 to date. In the Centrelink documents, there is no evidence of a response from the Applicant’s ex-husband.

44. An annotation to the review dated 10 October 2012 noted that the last rate advised to Centrelink was $462.03 per week as of 12 July 2008.

45. An annotation to the review dated 22 March 2013 noted that the Applicant’s ex-husband’s compensation payments were later updated on 10 August 2009 at $442.05 weekly. It was also noted that “As per ITRS for 2008/2009 partner compo was $36023 pa, 2009/2010 $38762 pa and 2010/2011 $37758 pa”.

46. At the time of the Applicant’s application for Austudy on 12 December 2008, Centrelink documents record her ex-husband’s taxable income as $22,000.

47. From 16 December 2008, the Applicant’s ex-husband’s taxable income recorded regular increases from $24,025 to $36,500 on the 14 June 2013.

48. Included in the evidence before the Tribunal is a document from Employers Mutual titled “Scheduled list of payments for [the Applicant’s ex-husband] as at 4/4/13” (SLP).

49. This document lists the Applicant’s ex-husband’s gross daily rate of compensation payments from 1 February 2009 to 24 April 2013. The document also lists the fortnightly net payment after tax.

50. On perusal of the document, the taxable income that was regularly recorded in Centrelink documents appears to have been the net income after tax.

51. For example, on 15 June 2010 Centrelink recorded a taxable income of $31,000 for the financial year 2010/2011. The SLP notes indicate that during the financial year 2010/2011, the Applicant’s ex-husband’s gross fortnightly payment was $1452.32. The net payment after tax ranged from $1,250.32 to $1,264.32 (i.e. approximately $32,500).

    Consideration

52. Section 1237A of the Act provides for waiver of a debt due to administrative error. Subsection 1237A(1) of the Act relevantly states:

    Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

    Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).

53. Therefore, the issue is whether a proportion of the Applicant’s debt can be attributed solely to administrative error by Centrelink.

54. The Respondent contends that the law in relation to sole administrative error is very strict, and even minor contributory actions by the debtor, such as leaving part of a form blank, or failure to make expected enquiries, may prevent debt from being found “solely” due to administrative error.

55. In considering this issue, I believe it is relevant to revisit the decision of the SSAT where the presiding member stated, inter alia, as follows:

    [32] At the hearing [the Applicant and her then husband] stressed that they had provided all necessary information to Centrelink regarding the periodic compensation payment and could not understand how the debt could have been allowed to accumulate. [The Applicant] stated that each semester she re-enrolled in her studies at TAFE, Centrelink would request that she provide a payslip to verify [her then husband’s] periodic compensation payments.

    …

    [38] [The Applicant] impressed the Tribunal as a witness of credit. […] [The Applicant] had difficulties in understanding the quantum of her husband’s weekly income and she used the best endeavours to provide accurate income details to Centrelink. In fact the documentary evidence demonstrates that she would regularly report an increase in her husband’s income estimate for family tax benefit purposes, supporting her assertion that she did provide updates to Centrelink regarding [her then husband’s] compensation payments. The Tribunal finds without hesitation that neither [the Applicant] nor anyone else knowingly made any false statement to Centrelink that gave rise to the debt, notwithstanding that her income estimates under-declared [her ex-husband’s] income.

56. I recognise that the evidence given to the SSAT and the Applicant’s oral evidence before the Tribunal is somewhat inconsistent. However, given the length of time between the hearings and the Applicant’s domestic and financial difficulties, I accept that the more contemporaneous account of the interaction with Centrelink is probably more accurate.

57. In my view, the evidence before the Tribunal demonstrates that Centrelink was regularly informed of changes in the Applicant’s ex-husband’s income.

58. However, what is not clear from the Centrelink documents, is to how the information from the Applicant or her ex-husband was received. There is no evidence of any documents being viewed or considered and no indication as to the basis of the regular recording of taxable income, which was clearly incorrect.

59. The regular failure to recognise the difference between taxable income and after-tax income, in my view, is an administrative error that can be attributed solely to Centrelink.

60. Furthermore, when the discrepancy between the income declared to ATO and the taxable income declared to Centrelink was noted in on 20 December 2011, it is unclear why it took 15 months to finalise the matter, during which time the Applicant continued to receive payments unaware of an increasing debt.

61. On consideration of the available evidence, I am satisfied that a portion of the Applicant’s debt can be attributed solely to administrative error by Centrelink and find that the matter should be remitted for reconsideration.

    DECISION

62. The decision of the SSAT is set aside and the matter be remitted to the Respondent for reconsideration in accordance with the above reasons.

I certify that the preceding 62 (sixty-two) paragraphs are a true copy of the reasons for the decision herein of Dr I Alexander, Member

..............[SGD]……….…

Associate

Dated: 2 July 2018

Date of hearing:	12 June 2018
Applicant:	In person
Solicitor for the Respondent:	Ms E Ulrick, Department of Human Services