Nay and Secretary, Department of Family and Community Services

[2003] AATA 1004

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 1004

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2003/425

GENERAL ADMINISTRATIVE DIVISION		)
Re		SHANNON NAY

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mr RG Kenny, Member

Date7 October 2003 

PlaceBrisbane

Decision The Tribunal affirms the decision under review. 

.       (Sgd) RG Kenny

Member

CATCHWORDS

SOCIAL SECURITY – family tax benefit – overpayment – debt payable to the Commonwealth – whether debt may be written off or waived

A New Tax System (Family Assistance) Act 1999 s 58 and Schedule 3
A New Tax System (Family Assistance) Administration Act 1999 ss 71, 95, 97 and 101

Beadle v Director-General of Social Security (1985) 60 ALR 225
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Beadle and Director-General of Social Security (1984) 1 AAR 362

REASONS FOR DECISION

7 October 2003  Mr RG Kenny, Member      

Background

1.      During the financial year 2001/2002, Shannon Nay (the applicant) was paid family tax benefit in accordance with the terms of A New Tax System (Family Assistance) Act 1999 (the FA Act) and the payments were based upon an estimate of the combined income of herself and her husband, Malcolm Nay.

2. On 13 January 2003, a delegate of the Secretary, Department of Family and Community Services (the respondent) determined that the applicant had been overpaid an amount of $1,855.56 which was a debt due by her to the Commonwealth and which was not able to be written off or waived under the provisions of the FA Act or the A New Tax System (Family Assistance) Administration Act 1999 (the FAA Act). That decision was affirmed by a further delegate on 10 March 2003 and, in turn, by the Social Security Appeals Tribunal on 17 April 2003. On 20 May 2003, the applicant sought review of that decision by the Administrative Appeals Tribunal (the Tribunal).

Hearing and Evidence

3.      The applicant was represented at the hearing by her husband, Malcolm Nay.  The respondent was represented by James Howard.

4.      At the hearing, the following was taken into evidence:

Exhibit 1 - the documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T Documents: T1 to T27);

Exhibit 2 - a statement of salaries of Police Officers for 2002-2004;

Exhibit 3 - general information pertaining to the Queensland Police Service;

Exhibit 4 - a summary of payments made to the applicant in the period from 27 May 2003 to 30 September 2003;

Exhibit 5 - a statement of the applicant’s financial circumstances;

Exhibit 6 - a copy of the taxation notice of assessment of Malcolm Nay;

Exhibit 7 - a letter dated 25 July 2003 from the National Australia Bank to Mr and Mrs Nay re credit contract;

Exhibit 8 - a Group Certificate in the name of Malcolm Nay dated 3 July 2003; and

Exhibit 9 - a letter to the letter from Hatzis Lawyers dated 22 August 2003

Issues and Legislation

5. It has been conceded by the applicant that, in the financial year 2001/2002, she received family tax benefit payments in the amount of $4,607.66 and that, on the basis of the income earned by herself and Mr Nay during the period, her entitlement was only $2,752.10. She conceded that there had been an overpayment of $1,855.56 which was a debt due by her to the Commonwealth. The contentions put to the Tribunal were in relation to whether or not that debt could be written off or waived under the provisions of the FAA Act which read:

“Secretary may write off debt

95(1)    Subject to subsection (2), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

95(2)    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.

95(3)  For the purposes of paragraph (2)(a), a debt is taken to be irrecoverable at law if, and only if:

(a)the debt cannot be recovered by means of:

(i)deductions under section 84; or

(iaa)deductions under section 1231 of the Social Security Act 1991; or

(ia)setting off under section 84A arrears of family assistance; or

(ii)application of an income tax refund under section 87; or

(iia)setting off under section 87A against advances; or

(iii)legal proceedings under section 88; or

(iv)garnishee notice under section 89;

because the relevant time limit for recovery action under that section 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.

95(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 arrears of family assistance; or

(c)application of an income tax refund under section 87; or

(d)setting off under section 87A against advances;

the person is taken to have a capacity to repay the debt unless recovery by those means would cause the person severe financial hardship.

95(5)  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).

95(6)  Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.

…

Waiver of debt arising from error

97(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.

97(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.

97(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.

97(4)  For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.

…

Waiver in special circumstances

101.  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.”

Applicant’s case

6.      Mr Nay submitted that the debts in this case should not have to be repaid because they arose either solely or in large part because of administrative error on the part of Centrelink officers.  In particular, he referred to incorrect advice given to the applicant in relation to whether or not foreign income was to be taken into account in determining the level of payments of family tax benefit.  He said that, during the 2001/2002 financial year, he had earned $147,375 for work that he had performed in Angola whereas the payment of family tax benefit had been based upon an estimate of income of $65,000.

7.      Mr Nay referred to contacts by the applicant with Centrelink officers in June 2001 indicating the prospect that he may well go overseas for employment and earn income in the order of that which he actually earned. He said, however, that he did not go to Angola until September 2001. He said that, in the meantime, the applicant had again contacted Centrelink on 6 August 2001 and advised that he had not gone to Angola at that time and had not begun to earn income for that financial year.  He said that the applicant was advised to provide Centrelink with an estimate of income based upon the level of income in the previous financial year and that this was how the amount of $65,000 was provided to Centrelink.  He submitted that, throughout their dealings with Centrelink, he and the applicant had not been told that they had to advise of their overseas income.

8.      Mr Nay said that his wife was not in employment but that she undertook home duties with their two children aged 5 and 3 years, respectively.  He said that he previously had been an officer with the Queensland Police Service but had resigned to work in Canberra for the Australian Protection Service.  He said that he continued in that work until 2 July 2001 when he returned to Brisbane and was then out of work until he went, in September 2001, to Angola to serve a twelve month contract but had returned in April 2002 though he received the benefit of full payment for the year. 

9.      Mr Nay said that, in October 2002, he rejoined the Police Service but had to go through the basic training and probation period, which he is currently still serving.  This meant that his initial income had been low and he said that he and the applicant were barely able to make ends meet, in the financial sense, on that wage.  He said that, in the 2002/2003 financial year, he earned less than $30,000 but that his current wage is in the order of $36,000 plus allowances and that his regular take-home fortnightly salary is between $1,100 to $1,200.

10.     He said that he expected his probation period to end in January 2004 and for his salary to increase and he also expected, because of his previous service, to enjoy the benefits of accelerated progression in the Police Service.

11.     Mr Nay said that he and the applicant owned a home which had recently been valued by the bank at $280,000 and he said that the equity that they have in it is approximately $200,000. He said that, since March 2003, they have been attempting to sell the house but had been unsuccessful despite having two potential buyers enter into contracts which ultimately fell through.  He said that the only way that he is able to meet his monthly payments of $1,233 on the house was through re-financing the loan and providing a separate fund in excess of $15,000 which was earmarked for the purposes of making monthly payments until such time as they were able to sell the house.  He said that this meant he had been able to dedicate his wage to meeting their usual living expenses.

12.     Mr Nay said that the only other debt that he and his wife have is approximately $1,000 on a credit card but he said that they faced the following periodic payments associated with daily living: rates to the Brisbane City Council at $528 per quarter, a phone bill in the order $140 per month, house and car insurance in the amount of $110 per month, electricity accounts for approximately $460 per quarter, expenses of running his car in the order of $50 per week, pre-school fees in the order of $660 per quarter and basic food costs which amounted, usually, to around $250 a week.  In addition, he said that deductions have been taken from his wife’s family tax benefit payment in the amount of $40 which means that the net amount received through that payment is $251.14 per fortnight.

13.     Mr Nay described the health of the members of the family as being good.  He said that he and the applicant do not live a lavish lifestyle which was capable of being greatly scaled down and, for example, he said that they do not consume alcohol, do not smoke cigarettes, and do not have cable television.

14.     Mr Nay submitted that the debt should not have to be repaid because it arose through the negligence of Centrelink officers.  He said that this, in itself, was a special circumstance which should be taken into account. He also referred to a contention by the respondent that, because the monies were being repaid by deductions from the fortnightly family tax benefit payment, this meant that they had a capacity to pay.  He said that attempts had been made by them to have the respondent cease making the deduction but this had been unsuccessful.  He said that an appointment had been arranged to have an interview with an officer to further that particular matter.  He said that the only way that he and his wife were able to survive was by living on accumulated debt.

Respondent’s Submission

15.     Mr Howard conceded that there may well have been incorrect information provided by Centrelink officers to the applicant in relation to whether or not Mr Nay’s foreign income had to be taken into account in determining the level of payments of family tax benefit.  He also conceded that the payments had been received by the applicant in good faith.  However, he submitted that these concessions did not mean that the debt had to be written off or waived.  In relation to the writing-off of the debt, he submitted that the only way this could occur was if it were not possible to recover the monies and that, because the applicant was a recipient of family tax benefit, this requirement was not able to be fulfilled. 

16. In relation to waiver of the debt, Mr Howard submitted that the mere existence of administrative error and the presence of good faith in the applicant were not sufficient for waiver under section 97 because, in addition, there needed to be severe financial hardship if the debt were not waived.

17.     Mr Howard referred to the steady employment of Mr Nay as a Police Officer and to his present salary of $1100 to $1200 per fortnight.  He also referred to the family tax benefit payments made to the applicant in the order of $251.14 after withholdings have been taken in the amount of $40 to cover the debt.  He accepted that there were some financial constraints operating on the applicant and Mr Nay but submitted that this did not leave them in a situation where they would suffer severe financial hardship if the debt were not waived.

18. In relation to special circumstances, Mr Howard submitted that it was not possible to take into account the administrative error of the respondent as a special circumstance because that was a particular mode of waiver available under section 97.

Consideration

19. It is not disputed in this case that Mr Nay’s foreign income had to be taken into account in determining the level of family tax benefit payable to the applicant in the 2001/2002 financial year. That is in accordance with the references in subsection 58(1) of the FA Act to the relevant rate calculated in Schedule 1 of the FA Act and to the reference to a person’s adjusted taxable income in Schedule 3 of the FA Act. It is also not disputed that the combined income of the applicant and Mr Nay for those purposes was $147,375 or that the applicant was paid during the 2001/2002 financial year on the basis of an income estimate that was provided by her on 6 August 2001 in the amount of $65,000. Further, it has been conceded by the applicant that, in the financial year 2001/2002, she received family tax benefit payments in the amount of $4,607.66 and that, on the basis of the income earned by herself and Mr Nay during that period, her entitlement was only $2,752.10. Pursuant to subsection 71(2) of the FAA Act, I am satisfied that the applicant was overpaid an amount of $1,855.56 which is a debt due by her to the Commonwealth.

20. Provision for writing off a debt is made in section 95 of the FAA Act and it sets out the criteria which enable a determination to write a debt off to be made. The only relevant ground is that the debtor has no capacity to repay the debt. However, subsection 95(4) of the FAA Act provides that a debtor is taken to have the requisite capacity to repay the amount of deductions from a person’s social security payment unless making those deductions would result in severe financial hardship. The family tax benefit payment summary (Exhibit 4) demonstrates that the applicant has been making these payments through deductions since 27 May 2003 and I am satisfied that, whilst this has contributed to their financial difficulty, it does not amount to severe financial hardship for her to maintain the continuation of those payments. I am satisfied that the debt cannot be written off in this case.

21. Section 96 of the FAA Act provides that a debt, once it has been correctly raised, can only be waived in certain circumstances. In this case, potentially relevant provisions are section 97 and section 101 of the FAA Act which relate to waiver of debts arising solely from administrative error and to waiver in special circumstances, respectively.

22. In relation to waiver on the basis of administrative error, there is no evidence of the precise conversations that took place between the applicant and Centrelink officers concerning what information about income details had to be provided. However, on the basis of the concession made by Mr Howard, I accept that there was, to some extent, error by those officers in providing information to the applicant about income levels. Nevertheless, the existence of error does not, in itself, enable the debt to be waived. Paragraph 97(2)(b) of the FAA Act also requires that the applicant would suffer severe financial hardship if it were not waived.

23.     An analysis of the income level of the applicant and Mr Nay as compared with their expenditures reveals that most of that income is spent without accumulating savings.  The major expenditure that they have outside of those that are listed above relate to house payments and, at the moment, these are being met by a sum which has been quarantined specifically for that purpose.  The evidence of Mr Nay was that there were sound prospects of their house being sold in the near future and, therefore, there is an end in sight to that additional expenditure.  When that happens, I am satisfied that the equity they have in that house will put them in a position where they will have a significant capital sum available to them.  In that situation, I am satisfied that they do not meet the requirement of being in the position where they would suffer severe financial hardship if the debt were not waived.

24. The FAA Act provides no guidance as to the meaning of the term special circumstances but the concept has been the subject of consideration in a range of legislative provisions relating to Social Security law. In Beadle v Director-General of Social Security (1985) 60 ALR 225, the Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term as it is applied in the context of the Social Security Act 1991.. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 228). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security(1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances must be “unusual, uncommon or exceptional” and must have a “particular quality of unusualness that permits them to be described as special".

25.    In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle, observed (at 545) that special circumstances:

“would require something to distinguish… [the]… case from others, to take it out of the usual or ordinary case. … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.”

26. The only matters that have been raised in the context of waiver for special circumstances under section 101 of the FAA Act are those relating to the presence of administrative error by the respondent and the applicant’s financial situation. I accept the correctness of the submission of Mr Howard that the provision does not extend to administrative error by the respondent as being a special circumstance because that is dealt with specifically in section 97 of the FAA Act. Also, while I accept, as noted above, that the applicant experiences a degree of financial hardship, the provision requires the presence of special circumstances other than financial hardship alone which would make it desirable to waive the debt and I am satisfied that there are no such additional circumstances in this case.

Decision

27.    The decision under review is affirmed.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member

Signed:         Sarah Oliver
  Associate

Date of Hearing  22 September 2003
Date of Decision  7 October 2003
For the Applicant  Mr M Nay, the Applicant’s husband 
For the Respondent                  Mr J Howard, Departmental Advocate