NEIL SMITH and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2009] AATA 483
•29 June 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 483
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/3466
GENERAL ADMINISTRATIVE DIVISION ) Re NEIL SMITH Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr A Sweidan, Senior Member Date29 June 2009
PlacePerth
Decision The Tribunal:
1. Affirms that part of the Social Security Appeals Tribunal (SSAT) decision dated 15 July 2008 that found that there had been an overpayment of age pension to the applicant in the relevant period arising from his failure to properly declare the nature of his employment with Community Newspapers and the income derived therefrom;
2. Remits the matter to the decision maker to recalculate the amount of such overpayment in accordance with the Tribunal’s decision; and
3. Sets aside that part of the SSAT decision that found that there had been an overpayment of age pension to the applicant in the relevant period on the grounds that he had failed to properly declare the nature of his income from The Sunday Times, and finds that the applicant was not an employee of The Sunday Times.
...(sgd) Mr A Sweidan..........
Senior Member
CATCHWORDS
REASONS FOR DECISION
29 June 2009 Mr A Sweidan, Senior Member Decision under Review
1. The applicant Mr Neil Smith seeks a review of the decision made by the Social Security Appeals Tribunal (SSAT) on 15 July 2008 to affirm the decision made by a Centrelink authorised review officer on 15 April 2008 to recover an age pension debt totalling $36,151.50 for the period 3 May 2003 to 1 February 2008 (“the relevant period”).
Issues
2. The issues to be considered by this Tribunal are whether:
·Mr Smith was overpaid age pension totalling $36,151.50 or some other amount in the relevant period,
·the amount of any such overpayment constitutes a legally recoverable debt,
·all or part of the debt should be written off for a period or waived.
Facts
3. The applicant Mr Smith was granted age pension with effect from 4 April 2003. A Centrelink on-screen document noted that:
“040403 date claim lodged 080403....customer turned 65 on 130303..currently self employed as per mod F: name of business: Crowsnest Syndications - lodged tax returns for 00/01 nett profit $14380, requested 01/02 returns...assets = $2000 (computer)... Other investments: svs: bankwest 0392227 bal $250, anz 560149778 bal $1176..shares: axa Asia pacific number of shares = 527....other assets: hpe $35000 and motor vehicle $6000...poi [proof of identity]: was already established on nma, hence abridged poi input on new claim activity...grant age pension as per s43ssa”.
4. Mr Smith had lodged a claim for age pension on 8 April 2003 when he also lodged an Income and Assets form. On that form Mr Smith advised:
·he was not currently receiving any income from work;
·in the last 12 months he had stopped working for the Roman Catholic Perth Archdiocese;
·he had no money invested in, among other things, superannuation funds;
·in the last 12 months he had not received a lump sum payment not declared elsewhere on the form; and
·he was involved in a business.
5. On 8 April 2003 Mr Smith also lodged a MOD F Business Details form. On that form Mr Smith advised:
·he was self employed or operated as a sole trader;
·the name of the business was Crowsnest Syndications;
·he commenced operating the business on 1 January 1982 [T7 at p105 question 3 at part A];
·the type of business or self employment was Freelance journalism/Desktop publishing;
·he had not purchased the business;
·the estimate of the current market value of the business assts was $2,000 (computer);
·the business was still operating;
·the business was generating income;
·he had not stopped working in the business and that he worked approximately 2 hours per week on journalism; and
·he was not looking for full time work due to illness (heart condition, cancer, injured back) and age.
6. On 8 April 2003 Mr Smith also provided Centrelink with:
·an ATO Notice of Assessment for the financial year ending 30 June 2001 showing a taxable income of $14,380.00;
·a 2001 PAYG Payment Summary from Centrelink indicating he had received $2,229.82 Newstart Allowance and $7,634.78 Newstart Mature Age Allowance in the financial year ending 30 June 2001;
·a 2001 Group Certificate from Bus. Intelligence Int. Pay indicating he had been paid $100.00 in allowances and $4,677 in gross payments in the period 20 November 2000 to 30 June 2001;
·a PAYG Payment Summary from The Sunday Times indicating he had received $5,180.00;
·copy of his taxation return that indicated he had been paid $12,368 gross in salary or wages and a loss of $8,128 net income from his business as a features writer; and
·a profit and loss statement for the financial year ending 30 June 2001 for his business (which is unnamed on the profit and loss statement but which indicates the ABN number is 52 823 746 239 79). The profit and loss statement indicates that his revenue was $28,455, his expenses $14,075 and his profit $14,380.
7. On 11 April 2003 Centrelink wrote to Mr Smith and advised that he may be able to receive help under the Pension Loan Scheme. The letter was a notice pursuant to section 68 of the Social Security (Administration) Act 1999 (“Administration Act”) and advised Mr Smith that an annual income of $14,444.10 had been used to calculate his regular payment and that he must tell Centrelink within 14 days if, among other things, his income increased, if he started work or recommenced work, or if he started any form of profession, trade, business or self employment.
8. On 16 July 2003 a Centrelink document was recorded which states:
“cus [customer] cos [counter statement] - lodged profit and loss 12 weeks to 300603 (dov) [date of event] customer has requested that we assess his business income from Crowsnest Syndications from the last 12 weeks profit and loss as he has lost a major contract in April 2003, hence his taxation returns will not correctly reflect the right income..... 12 week period to 300603 total income $455 less expenses $2340, loss have updated rebs [Real Estate/Business Summary] to zero income dov 300603, customer will continue to lodge 12 weekly profit and loss statements....inc [income] as per s78ssaa [Social Security (Administration) Act]”.
9. On 16 July 2003 Centrelink sent Mr Smith a further s. 68 notice and advised him that an annual income of $64.10 had been used to calculate his regular payment and again informed him of his obligations as set out in paragraph 7 above.
10. Notices to similar effect were sent to Mr Smith on at least 12 further occasions during the relevant period. It is not necessary to detail all of these, except to say that it is clear from each notice that Centrelink had not been correctly informed by Mr Smith of his employment status at Community Newspapers, and the nature of his income from that employment.
11. On 17 October 2003 Mr Smith provided Centrelink with a profit and loss statement for the period 1 July 2003 to 30 September 2003, which indicated that his profits were $240 less $2,837.38 expenses, equating to a loss of $2,597.38.
12. On 6 January 2004 Mr Smith provided Centrelink with a profit and loss statement for the period 1 October 2003 to 30 December 2003, which indicated that his gross income was $960, his expenses were $1,629 and his current net income was nil.
13. On 8 April 2004 Mr Smith provided Centrelink with a profit and loss statement and advised that he was currently in the process of building a new self employment business, Neil Smith Features. A Centrelink on-screen document recorded: “reset custs [customer’s] earnings to zero as cust [customer] currently is in building process of business and has a nett loss of $597.00”.
14. On 13 July 2004 Mr Smith provided Centrelink with a profit and loss statement and advised that his total income was $2,099.00 and his total outgoings were $5,479.00 resulting in a loss of $3,380.00.
15. On 15 October 2004 Mr Smith provided Centrelink with a profit and loss statement for Neil Smith Features. Mr Smith advised the business was running at a loss and the loss for the quarter was $5,329.00.
16. On 17 January 2005 Mr Smith provided Centrelink with a profit and loss statement for the last quarter and advised that the aggregate of the last 2 quarters was a loss of $3,556.
17. On 19 April 2005 Mr Smith advised Centrelink that his business, Neil Smith Features, had made a profit of $741 in the period 1 January 2005 to 31 March 2005. Mr Smith’s quarterly income was annualised to $2,964.
18. On 18 July 2005 Mr Smith lodged with Centrelink a profit and loss statement for Neil Smith Features for the June quarter. A Centrelink on-screen document noted that the business income had already been updated from Mr Smith’s 2005 tax return.
19. On 9 September 2005 Mr Smith lodged with Centrelink his 2005 taxation return, which indicated that his total business income was $1,973; his expenses were - rent $1,427, depreciation $3,950, vehicle $1,212 and maintenance $1,863. Other expenses totalled $6,176 and included the purchase of a computer and digital camera. A Centrelink on-screen document notes that:
“No depreciation schedule was lodged - unable to ascertain value of business assts. _ However, even if capital expenditure is disregarded business would still be running at a loss.
20. On 28 April 2006 a Centrelink on-screen document notes that Mr Smith was to lodge a 3 monthly profit and loss statement and that he had made a profit for the first time. A further Centrelink on-screen document dated 28 April 2006 noted that Mr Smith had lodged a profit and loss statement for Neil Smith Features for the March 2006 quarter. The document notes that the:
“business ran at a loss during September and December quarters.
March quarter details:
Gross income: $8786
Allowable expenses: super: $688; mileage $252; Total $920
PAYE tax instalments not allowed
Assessable income: $7866
Income spread over three quarters: $10488
21. On 7 July 2006 Centrelink sent Mr Smith an Account Statement (which is also a notice pursuant to section 68 of the Administration Act), and advised Mr Smith that his annual assessed income as held by Centrelink was $10,488. The letter again advised him that he should check the information in the statement carefully and tell Centrelink within 14 days if any information was incorrect, missing or needed to be updated; and that he must tell Centrelink within 14 days if, among other things, he was starting, stopping, going back to or changing work in any form of profession, trade, business or self-employment and if there were any changes to his income from employment.
22. On 18 August 2006 Mr Smith provided a profit and loss statement for Crowsnest Syndications for the quarter ending 30 June 2006. A Centrelink on-screen document notes that:
23. “Nil income from crowsnest syndications but other income from community newspapers and other publications improved. Total gross inc [income] $12491 and expenses of $7031 leaving net profit of $5460 for the qtr [quarter]. Assessable income annualised is $21840. rebs [Real Estate / Business Summary] updated”.
24. On 19 August 2006 Centrelink sent Mr Smith a notice and advised him that an annual income of $21,967.35 had been used to calculate his regular payment.
25. On 16 October 2006 Mr Smith provided a profit and loss statement for the quarter ending 30 September 2006. A Centrelink on-screen document notes that:
26. “Nil income from Crowsnest Syndications but other inc [income] from community newspapers and other publications improve. Total gross income $8337 and expenses of $8337 leaving net profit of $1274 for the qtr [quarter]. Assessable income annualised is $1274 x 4 = $5096 per annum”.
27. On 23 January 2007 Mr Smith lodged a profit and loss statement for the December quarter. A Centrelink on-screen document notes that the profit and loss statement:
“shows gross receipts of $5,714
from this deduct $20 (gst) and $622 (vehicle expenses). All other allowable expenses $4699
This leaves net profit of $403 for the quarter. Annualised this is $1612.”
28. On 17 April 2007 Mr Smith lodged a profit and loss statement for the quarter to 31 March 2007, which showed a loss of $1,213 for the period. Mr Smith’s loss was annualised as $4,852.
29. On 7 July 2007 Centrelink sent Mr Smith an Account Statement (which is a notice pursuant to section 68 of the Administration Act), and advised Mr Smith that his annual assessed income as held by Centrelink was $4,852. The letter again advised him of his obligations as detailed before.
30. On 9 July 2007 Mr Smith provided business / partnership details for Neil Smith Features. He advised his income was $12,076. Mr Smith further advised that his gross income for the last 3 months had been $2,251 less expenses of $1,215 leaving a net profit of $1,038. A Centrelink on-screen document notes:
“This is actually for 6 months as it takes into account loss for last 3 months. Annual income is therefore $2076” [T25 at p322].
31. On 24 July 2007 a data matching exercise revealed that in the 29005/06 financial year the income Mr Smith had declared to the Australian Taxation Office was $34,328 but the income he had declared to Centrelink was $0. An annotation to that on-screen document was made on 6 August 2007 and notes:
“Cus [customer] stated works as a freelance journalist, has own ABN number. Cus supplies 3mthly [monthly] BAS [Business Activity Statement] to FRE [Fremantle] CSC [Customer Service Centre] for updates. Cus unsure how discrepancy could occur when information is constantly supplied. Cus stated works for Community Newspaper, obtains a fee for writing articles. Cus has information required, but query if he’ll be compensated for time lost from work due to supplying information to CLK [Centrelink]. Cus also query if discrepancy is due to confusion between FRE & SPD [Spearwood] not updating information when received”
32. On 24 July 2007 Centrelink wrote to Mr Smith advising that a data matching exercise had revealed that in the 2005/06 financial year the ATO records showed his income (other than Centrelink income) was $34,328.00.
33. On 9 August 2007 a further annotation made to the on-screen document dated 24 July 2007 noted:
“Spoke to cus [customer] today. CUS understands datamatch and advised all his inc [income] for 05/06 has been declared to CLK [Centrelink] as part of his business income when he lodges his ITR [income tax return] as well as profit and loss statements. CUS explained he has done freelance writing for COMMUNITY NEWSPAPERS as well as for SUNDAY TIMES. Explained difference in assessing income as a sole trader from income as an employee (employment income). CUS advised that for SUNDAY TIMES, he gives them invoices while with COMMUNITY NEWSPAPERS he completes timesheets. Queried whether CUS remembers signing Tax declaration form from either companies, and he answered he could not remember at all. CUS advised he has been dealing with FRE CSC [Fremantle Customer Service Centre] from date of grant of his AGE and has been regularly lodging profit and loss statements. CUS advised his PTR [? Tax Return] is prepared by an accountant. Requested proof of income from CUS for 05/06 and 06/07. CUS will mail 05/06 and 06/07 documents to DMM [Debt Management] directly”.
34. On 14 August 2007 the Australian Taxation Office confirmed:
·in the 2002/03 financial year Mr Smith had a taxable income of $41,294;
·in the 2003/04 financial year he had a taxable income of $8,638;
·in the 2004/05 financial year he had a taxable income of $27,270;
·in the 2005/06 financial year he had a taxable income of $25,568; and
·in the 2006/07 financial year he had a taxable income of $24,389.
35. On 21 August 2007 Community Newspaper Group Pty Ltd (“Community Newspapers”) provided Centrelink with details of Mr Smith’s earnings between 13 September 2003 and 2 July 2007.
36. On 21 August 2007 Community Newspapers also completed an Employer Declaration form and indicated that Mr Smith had been employed on a casual basis from 13 September 2004. Community Newspapers advised that in the period 13 September 2004 to 30 June 2005 Mr Smith earned $22,955 in gross salary with allowances of $924; and that in the period 1 July 2005 - 30 June 2006 Mr Smith earned $30,268 in gross salary with allowances of $775.
37. On 21 August 2007 Centrelink wrote to Mr Smith and advised that Community Newspaper had confirmed his employment status as “casual employment” and he would therefore need to report income from that source separately as earnings from wages per fortnight.
38. On 5 September 2007 The Sunday Times completed an Employer Declaration form and indicated that Mr Smith had been employed as a “contributor”, paid as piece work since 8 September 1999.
39. As is abundantly clear from the Centrelink records summarised above Mr Smith consistently represented that he was an independent self employed contractor and failed to disclose that he was employed on a wages or salary basis by Community Newspapers for a considerable part of the relevant period.
SSAT Hearing
40. At the SSAT hearing on 15 July 2008 Mr Smith said he was not employed by either Community Newspapers or The Sunday Times, but that he was a self-employed independent contractor providing services to these organisations. He contended that the income he received from the newspapers was income for his business, Crowsnest Syndications. Mr Smith told the SSAT that:
·he established Crowsnest Syndications in the early 1980s when Australia won the America’s Cup and he was heavily involved in the yachting industry, submitting articles to up to 14 national and international publications;
·his business also produced newsletters for a number of Western Australian yacht clubs. He maintained this business while he was working at, and during periods of leave from, The Sunday Times as he continued with some freelance journalism;
·he was made redundant from The Sunday Times on 30 June 1999 and was ineligible for newstart allowance because of his redundancy payment;
·he continued to submit articles on yachting and power boats to The Sunday Times and he does not consider that he is employed by The Sunday Times as he is paid on a piecework basis;
·there is significant cost in preparing these articles such as computing, Internet and radio-telephone costs;
·he does all this work from his home office then submits the articles to The Sunday Times where they may be edited before publication;
·he originally invoiced The Sunday Times for GST for his articles but they would not pay this, and they now deduct PAYG tax depending on the amount of the invoice he submits;
·he started working with Community Newspapers in September 2004. He had applied for a full time position but was offered relief casual work. He did not tell Centrelink when he started working with Community Newspapers as it was his understanding that it was his business providing services to the organisation rather than him being employed by them;
·he does most of the preparation of his articles for Community Newspapers at home, but is required to go to one of their offices to input his final submission on their specialised software. His articles are then subject to sub-editing;
·he has always been paid an hourly rate by Community Newspapers on the basis of time sheets submitted, and they deduct PAYG tax and superannuation. Since the Centrelink debt was raised he has changed his arrangements such that it is now his business that is providing services to Community Newspapers. He considers that his new arrangements merely formalise what he had always understood to be his working relationship with Community Newspapers;
·he occasionally works for a week at a time at a Community Newspapers office if he is doing relief work. When he travels to the Mandurah office he is reimbursed his travel costs, as it is outside of the metropolitan area. If he works at Midland, for example, which is much further from his home in Coogee, than Mandurah, his travel costs are not reimbursed as he is working within the metropolitan Area;
·his accountant prepares his quarterly BAS statements and he uses this information to lodge quarterly Profit and Loss statements with Centrelink;
·Crowsnest Syndications does not have a bank account and his invoices to The Sunday Times are submitted in his own name and payments are made into his personal bank account.
41. On 14 October 2008 Mr Greg Thomson, Editor in Chief of the Community Newspapers responded to a number of questions put to him by Centrelink and advised:
·no letter of appointment or employment contract was made between Mr Smith and the Community Newspapers when he commenced employment;
·Mr Smith was paid as a wages employee when working a casual reporter and was paid as an award-based employee covered by the Community Newspaper’s editorial bargaining agreement and he was taxed accordingly. Community Newspapers also paid Mr Smith separately as a contributor for his work on the Mandurah Coastal Times motoring section, for which he sent the Community Newspapers an invoice for a flat fee that had been negotiated between himself and the Editor and made his own taxation arrangements;
·in relation to Mr Smith’s duties, Community Newspapers advised that as a casual reporter he writes news stories for their newspaper, works as an employee during those period and reported to an editor and was directed by the editor on his work; and for his work as a motoring contributor he was paid an agreed fee and reported to the Editor in Chief but managed his own time and directed his own work;
·Mr Smith was directed to write specific news items when he was paid as a casual reporter and if he produced no work he would be unlikely to be offered future work;
·Mr Smith only worked as a casual reporter from time to time and this was normally to provide coverage when a full-time staff member was not at work and when he was rostered on Mr Smith was expected to work eight hour shifts with a designated start and finish time;
·when Mr Smith worked as a casual reporter his work was supervised. He was able to suggest story ideas and could then be given approval to work on those ideas. When Mr Smith worked as a contributor he was able to work on his own initiative;
·when Mr Smith worked as a casual reporter he was required to, and did, identify himself as writing for Community Newspapers;
·the Community Newspapers owned the copyright of material written when Mr Smith works as a casual reporter and he was unable to offer stories written during his casual employment to other media outlets. When he worked as a contributor Community Newspaper obtained copyright permission from Mr Smith and theoretically he was able to offer that copy to other media outlets;
·Mr Smith’s employment roster as a casual reporter was highly variable and some weeks he may work no shifts and in other weeks he might be paid for 3 or 4 days work;
·Mr Smith is free to accept or decline offers of work as a casual reporter, however, he cannot work for greater than 38 hours weekly;
·Community Newspapers provided Mr Smith with computers, telephones, stationary etc. to complete his work when he worked as a casual reporter. When working as a contributor Mr Smith often used his own home equipment but was required to attend Community Newspapers office at least once every edition to carry out his tasks;
·Mr Smith is not eligible to be paid annual leave or sick leave
·Mr Smith is paid superannuation and has taxation deducted from his salary when he is working in his capacity as a casual reporter;
·Mr Smith’s salary as a casual reported is covered by Community Newspaper Group’s Editorial Bargaining Agreement which prescribes his rate of payment; and
·when Mr Smith is working as an employee (i.e. as a casual reporter) he is covered by statutory requirements such as workers compensation.
42. Community Newspapers advised on 29 October 2008 that in the period 3 May 2003 to 1 February 2008 Mr Smith worked 4,247.45 hours as a waged employee with their company and nil hours as a contributor in that period. They noted that Mr Smith had worked nil hours as a waged employee in the period 3 May 2003 to 30 June 2004.
43. On 31 December 2008 The Sunday Times, in response to questions put by Centrelink advised that:
·no letter of appointment or employment contract was made between Mr Smith and The Sunday Times when he commenced employment;
·the Sunday Times considered that Mr Smith was an independent contractor / freelancer from whom they purchased final copy and paid via invoice;
·Mr Smith’s duties were to provide copy for the paper;
·Mr Smith was given no direction or supervision in his duties;
·Mr Smith was not directed to produce specific news items or reports and could use his own initiative to decide what he would write;
·had total control over the manner, timeliness and other elements of performing his duties;
·Mr Smith was not required to identify himself as writing for The Sunday Times when interviewing people;
·The Sunday Times purchased the copy written by Mr Smith and he was not able to provide that copy to other media outlets;
·The Sunday Times did not provide Mr Smith with any of the tools and equipment required by him in his duties and he used his own writing equipment and pc etc.;
·Mr Smith was not paid annual leave, sick leave or superannuation and no taxation was deducted from his payments.;
·Mr Smith was paid an agreed rate for purchase of the copy he wrote;
·The Sunday Times held no public liability or other insurance in relation to Mr Smith; and
·Mr Smith was paid an agreed rate for the purchase of his copy.
44. The evidence before this Tribunal was to similar effect to that set out above.
The Legislative Framework
45. The legislation relevant to this decision is contained in the Social Security Act 1991 (“the Act”) and the Administration Act.
46. Social Security legislation is interpreted by Centrelink officers with the aid of the Guide to Social Security Law (the Guide). The Tribunal is not bound by law to apply the policy set out in the Guide, but provided that the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course to follow it (Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634. Generally the Tribunal will follow the Guide unless there is a cogent reason not to do so. In this case, there is no material before the Tribunal to indicate that the Guide should not be applied.
ISSUE ONE: Was Mr Smith overpaid age pension in the relevant period?
47. Section 55 of the Act provides that a person’s rate of Age Pension is to be calculated according to Rate Calculator at the end of section 1064 of the Act.
48. Section 1064-A1 of the Act requires the application of the ordinary income test using Module E in Section 1064-E1.
49. The Rate Calculator requires the ordinary income of the person calculated on a fortnightly basis to be taken into account in working out the person’s rate. The amount payable is reduced if the fortnightly income of the person exceeds a certain amount.
50. Section 1072 of the Act states that a reference to a person’s ordinary income for a period is:
“ reference to the person's gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.”
51. Division 1A (sections 1074 and 1075) of Part 3.10 of the Act relates to business income. Section 1074 addresses the treatment of trading stock and is not relevant to the present case. Section 1075 of the Act includes provisions relating to permissible reductions of business income and is set out below.
52. Subsection 1075(1) states:
“ to subsection (2), if a person carries on a business, the person's ordinary income from the business is to be reduced by:
(a) losses and outgoings that relate to the business and are allowable deductions for the purposes of section 8-1 of the Income Tax Assessment Act 1997; and
(b) amounts that relate to the business and can be deducted in respect of plant (within the meaning of the Income Tax Assessment Act 1997 ) under Division 40 of that Act; and
(c) amounts that relate to the business and are allowable deductions under section 290-60 of the Income Tax Assessment Act 1997.”
53. Subsection 8(1) of the Act defines the term ordinary income to mean income that is not maintenance or an exempt lump sum. Income is further defined in section 8 as follows:
"income” , in relation to a person, means:
(a) an income amount earned, derived or received by the person for the person's own use or benefit;…
“income from personal exertion” means an income amount that is earned, derived or received by a person by way of payment for personal exertion by the person but does not include an income amount received as compensation for the person's inability to earn, derive or receive income through personal exertion. ...
...“earned, derived or received” is a reference to:
(a) an income amount earned, derived or received by any means; and
(b) an income amount earned, derived or received from any source (whether within or outside Australia).”
54. In determining whether Mr Smith has been overpaid age pension the Tribunal must first decide whether his income from Community Newspapers and The Sunday Times was derived from employment, to which section 1072 of the Act is applicable, or whether he was running a business as an independent contractor, to which section 1075 of the Act is applicable.
55. Instruction 1.1.E.87 of the Guide to the Social Security Law (“the Guide”) provides definitions of the terms ‘employee’ and ‘private contractor’, as follows:
An employee is someone who is: under a contract OF service to an employer,
AND· a salary or wage earner (1.1.S.20),
AND· subject to PAYG tax deductions. Anyone who is solely an employee is not self-employed.
The employees of a self-employed individual are wage or salary earners.
A private contractor is someone who is under a contract FOR services.”56. Instruction 4.3.3.20 of the Guide provides the following guidance in respect of determining whether a person receives income from employment as an employee or a self-employed contractor:
“contract OF service or labour indicates an employer/employee relationship. A high level of control over the power of deciding the following matters by another person suggests an employer/employee relationship:
•what is to be done,
•who is to do it,•the way it is to be done,
•what means are to be used,
•the time when work is to be done, and•the place where the work is to be done.
If the employment contract is one OF service, the person is an employee.…
A contract FOR services to produce a result indicates self-employment. If the 'when, where, how and who by' is left to a person's choice, it is likely that the person does the work as a self-employed contractor. A person who owns the business premises, the tools and equipment is usually a self-employed Contractor.”
57. In respect of income assessment for employees, Instruction 4.3.3.20 of the Guide states:
“money (or other valuable consideration) earned, derived or received from remunerative work done by the person as an employee (1.1.E.87) in an employer/employee relationship is assessed as the person's income without any reductions. This income is called employment income (1.1.E.102) and includes, but is not limited to commissions, salary, wages, employment-related fringe benefits or a combination of these.”
Case Law
58. The decision of Re Jenkins and Secretary Department of Employment and Workplace Relations (2007) 94 ALD 763 which quoted the decision of Hollis and Vabu Pty Ltd (ta Crisis Couriers) (2001) 181 ALR 263 states in part as follows:
52. In Hollis v Vabu Pty Limited t/a Crisis Couriers (2001), the High Court held that a bicycle courier was an employee, not an independent contractor. In this case the couriers provided their own bicycles and had to bear the expense of providing for and maintaining them. They provided their own street directories and telephone books. Very importantly they received no wage or salary. They were paid a prescribed rate for the number of successful deliveries they made. The courier's contracts also provided no payments for annual leave, sick leave and no superannuation deductions.
53. Gleeson CJ and Gaudron, Gummow, Kirby and Hayne JJ said in Hollis, amongst other things:
“First, these couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any "goodwill" as a bicycle courier (at 48).
Secondly, the evidence shows that the couriers had little control over the manner of performing their work.... (at 49).
Thirdly, the facts show that couriers were presented to the public and to those using the courier service as emanations of Vabu (at 50).
Fourthly, there is the matter of deterrence. Reference has been made to the findings of fact in this case respecting the knowledge of Vabu as to the dangers to pedestrians presented by its bicycle couriers and the failure to adopt effective means for the personal identification of those couriers by the public. ... (at 53).
Fifthly, Vabu superintended the couriers' finances: Vabu produced pay summaries and couriers were required to dispute errors. There was no scope for the couriers to bargain for the rate of their remuneration.... (at 54).
The method of payment, per delivery and not per time period engaged, is a natural means to remunerate employees whose sole duty is to perform deliveries, not least for ease of calculation and to provide an incentive more efficiently to make deliveries. The fact that the couriers were responsible for their own bicycles reflects only that they were in a situation of employment more favourable than not to the employer; it does not indicate the existence of a relationship of independent contractor and principal (at 56).
Finally, and as a corollary to the second point mentioned above, this is not a case where there was only the right to exercise control in incidental or collateral matters. Rather, there was considerable scope for the actual exercise of control. Vabu's whole business consisted of the delivery of documents and parcels by means of couriers. Vabu retained control of the allocation and direction of the various deliveries. The couriers had little latitude ... . ... to its customers they were Vabu and effectively performed all of Vabu's operations in the outside world. It would be unrealistic to describe the couriers other than as employees (at 57).
54. Mr Jenkins has a home office and is able to work from home, however he normally works at NLP’s premises and uses their equipment. Mr Jenkins contributes to the cost of telephone calls as part of the fee he pays for the ‘seat costs’ which was taken into account in his commission fee structure.
55. The Tribunal is of the view that the seat cost and work setup reflects ‘a situation of employment more favourable than not to the employer and it does not indicate the existence of a relationship of independent contractor and principal’.
56. It is clear from the evidence that Midline Unit Trust hold the rights to the intellectual property and Mr Jenkins has little latitude regarding the structure or form of the product that is being sold, or advertisement material available for distribution.
57. The fact that Mr Jenkins is regarded by the Australian Taxation Office (ATO) as self-employed for taxation purposes does not, in the Tribunal’s view, determine the issue under social security legislation. The Tribunal notes that there is no evidence as to the basis on which the ATO made its determination and further that the relevant taxation law provisions are different to the social security laws which are in issue here.
58. In the Tribunal’s opinion the Social Security Appeals Tribunal was correct in finding that Mr Jenkins is not carrying on a business for the purposes of the social security legislation and should be regarded as an employee and not self-employed. Consequently, Mr Jenkins’ gross income from Midline Unit Trust, should be considered, without any deductions, when determining Mrs Jenkins’ rate of Parenting Payment (PP) and the $1,300 per month retainer to be taken as earnings and the commission taken in account in accordance with s 1073 of the Act.
59. In the De Luxe & Yellow Cabs Co-operative (Trading) Society Ltd & Ors v Commissioner of Taxation [1997] 840 FCA, Justice Hill considered whether taxi drivers were employees or independent contractors. Justice Hill concluded that the agreement between the operators and drivers was one of bailment and not one of employment. The matters he considered to be of particular relevance included the fact that the driver pays the owner; the existence of a bailment agreement; the degree of control exercised by the operators over the drivers; and the fact that drivers provide their own charge as well as expenses incurred.
60. The Supreme Court of Western Australia considered employment relationships in Commissioner of State Revenue v Mortgage Force Australia Pty Ltd [2009] WASCA 24 (30 January 2009) and stated:
62. The determination of whether a person is an employee or independent contractor is a question of fact. See Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561, 568 - 569 (Dixon CJ, Williams, Webb and Taylor JJ). A question of law may also be involved, however, where the person is retained under a written agreement and it is necessary to construe the agreement. It is true, no doubt, that each case turns on its own facts.
63. In Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539, Latham CJ said:
If the work to be done by one person for another is subject to the control and direction of the latter person in the manner of doing it, the person doing the work is a servant and not an independent contractor , and prima facie his reward would be wages. An independent contractor undertakes to produce a given result, but is not, in the actual execution of the work, under the order or control of the person for whom he does it (Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd (1924) 1 KB 762) - and cf. Federal Commissioner of Taxation v J Walter Thompson (Aust) Pty Ltd (1944) 69 CLR 227 at p 229) (545).
64. In the application of the control test, it is the right to exercise control (rather than actual control) which is of fundamental importance, although actual control is plainly relevant. See Federal Commissioner of Taxation v J Walter Thompson (Aust) Pty Ltd (1944) 69 CLR 227 232 (Latham CJ); Zuijs, 571 - 573
65. A different approach, usually referred to as the organisation or integration test, was formulated by Denning LJ in Stevenson Jordan & Harrison Ltd v Macdonald & Evans [1952] 1 TLR 101:
One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it (111).
66. In Co-operators Insurance Association v Kearney [1965] SCR 106, the Supreme Court of Canada approved the organisation test. Spence J, who delivered the reasons of the court, cited this passage from Fleming, The Law of Torts, 2nd ed, page 328:
Under the pressure of novel situations, the courts have become increasingly aware of the strain on the traditional formulation [of the control test], and most recent cases display a discernible tendency to replace it by something like an 'organization' test. Was the alleged servant part of his employer's organization? Was his work subject to co-ordinational control as to 'where' and 'when' rather than 'how', [citing Lord Denning in Stevenson, Jordan & Harrison Ltd v Macdonald [1952] 1 TLR 101 at 111.]
67. Both the control test and the organisation test have been criticised. See, for example, AN Khan, 'Who is a Servant?' (1979) 53 ALJ 832:
However, the 'integration' or 'organisation' (see Bank voor Handel en Sheepvaart NV v Slatford [1953] 1 QB 248; London General Cab Co Ltd v Inland Revenue Commissioners [1950] 2 All ER 566) test if applied in isolation can lead to as impractical and absurd results as the control test. The courts, therefore, came to the conclusion that a 'multiple' test should be applied, in that all the factors should be taken into account. Thus in Morren v Swinton & Pendlebury Borough Council ([1965] 1 WLR 576; see also Short v J and W Henderson Ltd (1946) 62 TLR 427) Lord Parker CJ stated that the control test was perhaps an over-simplification. His Lordship added that: 'clearly superintendence and control cannot be the decisive test when one is dealing with a professional man, or a man of some particular skill and experience'. Thus the courts started modifying and transforming the test into 'common sense' test, (Somervell LJ in Cassidy v Minister of Health [1951] 2 KB 343) or 'multiple' test (See Mocatta J in Whittaker v Minister of Pensions & National Insurance [1967] 1 QB 156) (834).
68. Professor P S Atiyah, Vicarious Liability in the Law of Torts, 1967, addressed the difficulty of formulating a single test for distinguishing between an employee and an independent contractor:
[I]t is exceedingly doubtful whether the search for a formula in the nature of a single test for identifying a contract of service any longer serves a useful purpose. ... The cases cited in this book are a sufficient demonstration of the extraordinary variety of relationships which have come before the courts at one time or another, and it is now clear that it is impossible to define a contract of service in the sense of stating a number of conditions which are both necessary to, and sufficient for, the existence of such a contract. The most that can profitably be done is to examine all the possible factors which have been referred to in these cases as bearing on the nature of the relationship between the parties concerned. Clearly not all of these factors will be relevant in all cases, or have the same weight in all cases. Equally clearly no magic formula can be propounded for determining which factors should, in any given case, be treated as the determining ones. The plain fact is that in a large number of cases the court can only perform a balancing operation, weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction. In the nature of things it is not to be expected that this operation can be performed with scientific accuracy (38).
69. The more modern approach, at least in Australia, requires an examination of all of the circumstances including the totality of the relationship between the parties, the identification of factors which are in favour of or against the characterisation of the relationship as an employment or not, and the attribution of relative weight to the various factors (some of which may actually or potentially conflict). The nature and extent of any right to control and the applicable organisational structure are factors to be taken into account and they may, in a particular case, be decisive.
70. In Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, Mason J (with whom Brennan J was in general agreement) said:
A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. It has been held, however, that the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it: Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561, at p 571; Federal Commissioner of Taxation v Barrett (1973) 129 CLR at p 402; Humberstone v Northern Timber Mills (1949) 79 CLR 389, at p 404. In the last-mentioned case Dixon J said:
The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions.
But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question: Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539, at p. 552; Zuijs' Case; Federal Commissioner of Taxation v Barrett (1973) 129 CLR, at p 401; Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210, at p. 218. Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee (24).
71. Wilson and Dawson JJ noted, to similar effect:
The classic test for determining whether the relationship of master and servant exists has been one of control, the answer depending upon whether the engagement subjects the person engaged to the command of the person engaging him, not only as to what he shall do in the course of his employment but as to how he shall do it: Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd [1924] 1 KB 762. The modern approach is, however, to have regard to a variety of criteria. This approach is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances (35).
Also see Hollis v Vabu Pty Ltd (2001) 207 CLR 21.
76. Where there is a written agreement between the parties, the agreement is the primary, but not the only, source of information as to the nature of the relationship between them. See Australian Mutual Provident Society v Allan (1978) 52 ALJR 407, 409.
77. In Allan, the appellant appointed the respondent as one of its representatives, upon terms set out in a written agreement. The Privy Council made a detailed examination of the written agreement and concluded that it provided for a contract of agency and not of service (411). Lord Fraser of Tullybelton, who delivered the advice of the Board, said it was possible that the written agreement may have been amended or varied by the subsequent conduct of the parties, and it was therefore proper to consider the subsequent conduct for the limited purpose of ascertaining whether it had the effect of varying the written agreement (411).
78. In Narich Pty Ltd v Commissioner of Pay-roll Tax [1983] 2 NSWLR 597, the Privy Council held that Allan is authority for the following principle of law, applicable to cases where there is a dispute as to the proper characterisation of a person as an employee or an independent contractor:
[S]ubject to one exception, where there is a written contract between the parties whose relationship is in issue, a court is confined, in determining the nature of that relationship, to a consideration of the terms, express or implied, of that contract in the light of the circumstances surrounding the making of it; and it is not entitled to consider also the manner in which the parties subsequently acted in pursuance of such contract. The one exception to that rule is that, where the subsequent conduct of the parties can be shown to have amounted to an agreed addition to, or modification of, the original written contract, such conduct may be considered and taken into account by the court: see the AMP case (1978) 18 ALR 385, at 392; 52 ALJR 407, at 411 (601). Compare Stevens, where Wilson and Dawson JJ stated that 'the actual terms and terminology of the contract will always be of considerable importance' in determining whether a person is an employee or an independent contractor (37).
79. Sometimes a written agreement will include a clause which asserts that the relationship between the parties is that of employer/employee or principal/ independent contractor as the case may be. Where the parties have defined their relationship in this manner, their expressed intention is significant and will be accorded weight (if it is not a sham), but will not be conclusive as to the true nature of the relationship. See Allan (407); Narich (601); Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction Forestry Mining and Energy Union of Workers [2004] WASCA 312 [24] (Steytler J). A deeming clause in relation to a person's status as an employee or an independent contractor will not be given effect, according to its terms, if it contradicts the effect of the agreement as a whole. See Allan (409); Narich (606).
Tribunal’s Findings
61. The Tribunal finds that Mr Smith’s employment relationship with Community Newspapers in the relevant period was that of an employer / employee and not one of an independent contractor / principal, except in relation to his work on the Mandurah Coastal Times Motoring Section for which he sent Community Newspapers an invoice for a flat negotiated separate fee.
62. The Tribunal accepts that given the nature of his arrangements with The Sunday Times that he was an independent contractor providing services to The Sunday Times. Consequently, the quantum of the debt arising from overpayment of age pension will need to be re-calculated, in light of the Tribunal’s findings.
63. The Tribunal is of the view that a number of factors indicate Mr Smith’s employment with Community Newspapers was one of a contract of services (rather than a contract for services) and indicative of an employer / employee relationship (as outlined in the Guide to Social Security Law at Instruction 4.3.3.20).
64. The factors indicating Mr Smith’s employment with Community Newspapers was one of employer/employee in the relevant period are that Mr Smith’s employment was subject to a high level of control by the Editor of the newspaper who could direct him as to what copy was to be written by him, the way in which that copy was to be produced, what means were to be used, and the time and place that the work was to be undertaken. The when, where, how and who by was not left to Mr Smith’s choice nor did he own all the tools and equipment used to produce copy as a casual reporter. While Mr Smith was not eligible to be paid annual leave or sick leave, Community Newspapers paid superannuation for Mr Smith and arranged that taxation be deducted from his salary when he was working in his capacity as a casual reporter. Mr Smith’s salary as a casual reporter was covered by Community Newspaper’s Editorial Bargaining Agreement which prescribes his rate of payment and, when Mr Smith was working as an employee for Community Newspapers he was covered by statutory requirements such as workers compensation. Although Mr Smith stated that he prepared some of his work for Community Newspapers at home, he was required to finalise his articles at Community Newspaper’s premises, on their specialised software, and his articles were then subject to sub-editing. Community Newspapers advised that when Mr Smith was rostered on as a casual reporter he was expected to work eight hour shifts with a designated start and finish time. Community Newspapers deducted PAYG tax and superannuation amounts from Mr Smith’s gross wages, before paying his net wages into his personal bank account.
65. The Tribunal finds that other than as set out above Mr Smith’s employment relationship with the Community Newspapers in the relevant period was that of an employee and employer. Accordingly under section 1072 of the Act, in determining Mr Smith’s rate of age pension his gross ordinary income (as defined in section 8 of the Act) from that source should have been assessed without any deductions for business related expenses and should have been taken into account on that basis when assessing his rate of age pension.
66. Mr Smith reported his net profit (less expenses) to Centrelink on a quarterly basis, rather than reporting his gross ordinary income within 14 days of it being earned as required and notified pursuant to the numerous section 68 notices sent to him. As a result of the way Mr Smith declared his income, his actual income from employment with Community Newspapers was not correctly taken into account in determining the rate of payment of his Age Pension and consequently Mr Smith was overpaid Age Pension in the relevant period 3 May 2003 to 1 February 2008. The amount of over-payment will need to be re-calculated by the respondent.
ISSUE TWO: If Mr Smith was overpaid Age Pension in the relevant period, is the overpayment is a debt due to the Commonwealth
Relevant law
67. Subsection 100(1) of the Administration Act provides for a retrospective rate reduction where a person fails to comply with a notice issued under subsection 68(2) of the Administration Act.
68. Subsection 1223(1) of the Act provides that if an amount is paid to a person by way of social security payment and the amount was not payable to that person, for whatever reason, then the amount so paid is a debt due to the Commonwealth
69. The application of subsection 1223(1) of the Act to the finding that Mr Smith was overpaid age pension means that he has a debt due to the Commonwealth for the amount of age pension overpaid.
ISSUE THREE: If the overpayment is due to the Commonwealth, should the debt be recovered
Relevant law
70. The Act provides that, in limited circumstances, recovery of all or part of a debt from a person may be waived or written off.
71. Subsection 1236(1A) of the Act provides that a debt may be written off, that is, recovery of the debt is deferred for a stated period, 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.”
72. Section 1237A of the Act provides, that subject to subsection 1237A(1), recovery of a debt must be waived where the debt was attributable solely to administrative error made by Centrelink and the payments that gave rise to the debt were received in good faith. Both parts of this provision must be met for waiver to occur under this section.
73. Section 1237AAD of the Act provides that Centrelink may waive the right to recover all or part of a debt if it is satisfied that the debt did not result wholly or partly from the debtor or another person knowingly making a false statement or false representation; or failing or omitting to comply with a provision of the Act and there are special circumstances (other than financial hardship alone) that make it desirable to waive; and it is more appropriate to waive than to write off the debt or part of the debt.
Administrative Error
74. The meaning of “solely” is not defined. However, in the unreported decision of Gerhardt and Department Employment, Education and Training (Unreported, AATA 10941, 17 May 1996), the meaning of “solely” was considered. The Administrative Appeals Tribunal held that “solely” means “exclusively”, “only” or “to the exclusion of all else”, and concluded:
There is nothing…which indicates that any meaning should be given to “solely” other than its ordinary meaning. Applying those ordinary meanings to the sub-section mean that the Secretary must waive the right to recover the proportion of the debt that is attributable only to the Commonwealth's administrative error. The Secretary's duty to waive does not extend to those debts which are attributable to errors or other factors which are independent of the Commonwealth's administrative error. It makes no difference that those other errors or factors are minor.
75. In the Tribunal’s opinion no portion of the debt arising during the period in the relevant period arose solely due to administrative error by Centrelink and therefore no portion of the debt can be waived pursuant to section 1237A of the Act.
Good Faith
76. Although it is not strictly necessary to do so in light of the Tribunal’s finding above, the Tribunal will nevertheless deal with the “good faith” requirement. Generally, the lay understanding of the term “good faith” is thought to indicate honesty and a want of good faith carries with it an implication of lack of honesty. However, the meaning of “good faith” was considered by the AAT in the case of Re Falconerand Secretary Department of Social Security (1996) 41 ALD 187. In that case it was found that if a person knows he is not entitled to the payment, then it cannot be said he received the payment in good faith.
77. The meaning of “received in good faith” has also been considered judicially on a number of occasions. The Federal Court has found that a person can even be unaware that payments have been made to them and can still be said, under the Act, not to have received payments in good faith.
78. In the case of Secretary, Department of Education, Employment, Training & Youth Affairs v Prince [1997] FCA 1565 the Federal Court held:
[Good faith is concerned] with the state of mind of a person concerning his or her receipt of the payment: if that person knows or has reason to know that he or she is not entitled to a payment received – i.e.. is not entitled to use the moneys received as his or her own – that person does not receive the payment in good faith.
79. Therefore the term “good faith” in the Act does not denote any dishonesty of the recipient.
80. In Haggerty v Department of Education, Training and Youth Affairs [2000] FCA 1287, the Federal Court held that if a person had a suspicion or doubt payments were erroneous, and there was an objective basis for such doubt, payments could not have been received in "good faith”.
81. The meaning of “good faith” was further clarified in Jazazievska v Secretary Department of Family & Community Services [2000] FCA 1484 where the Federal Court said:
A lack of good faith does not mean that the recipient of the payment must be acting fraudulently when the payment is received and retained. It means that for whatever reason, the recipient acts without an honest belief that he or she was entitled to receive and retain the payment when or she receives the payment and decides to exercise control over it by retaining I it.
Jazazievska’s case also considered whether a person who “turns a blind eye” could be said to act in good faith. The conclusion of the Court was:
A person does not act in good faith where the person turns a blind eye to circumstances which raise doubt as to the entitlement of the person to receive and retain the payment or refuses to make reasonable inquiries where doubt exists. [Emphasis added.]
82. The AAT also considered whether a person who disregards information contained in a Centrelink letter act in good faith in Re Secretary, Department of Family and Community Services and Jonauskas (2001) AATA 72. The Tribunal concluded:
Mr. Jonauskas did not know that there could be an error in the amount of Age Pension that he was paid and he did not know because he did not read the back of the letter requiring him to notify the Department [now Centrelink] if there were an error in his combined income. His not knowing is not, however, sufficient for me to find that he received the payment in good faith. He had reason to know that there might be an error and that reason was in the letter. He knew that he had been required to give details of his income and that of his wife and it was reasonable to expect that the amount of the income would have some effect upon the amount of the Age Pension. The words at the top of the Income and Investments form he signed on 7 July, 1997 told him that the “… information asked for on this form is needed to decide whether the Department can grant your claim, or will be used to calculate your rate of payment.” … I find that he did not care about any information in the letter other than the amount of pension he would be paid. He was careless as to whether it contained any other information that needed to engage his attention. In circumstances in which the information as to his obligations was given to him but he did not make any attempt to find out what they were let alone fulfill them, I do not find that he received the payments in good faith. [Emphasis added.]
83. As set out earlier Mr Smith was sent numerous section 68 notices in the relevant period all of which outlined the income Centrelink was using to assess his entitlement to age pension.
84. In the Tribunal’s opinion Mr Smith cannot say that he received the payments in good faith as he knew, or had reason to know, that Centrelink did not know his employment status and were failing to assess his entitlement to age pension on the correct basis.
Administrative Error
85. In the Tribunal’s view it is clear that at all times Centrelink acted on the information provided by Mr Smith and that the information provided by Mr Smith was that he was a self employed contractor and that all income was business income. The Tribunal finds that no part of the debt was attributable solely to administrative error on the part of Centrelink.
86. In Re Gerhardt and SDEET (1996) AATA10941, in relation to the equivalent waiver provision in the Student and Youth Assistance Act, the Administrative Appeals Tribunal (“AAT ”) held that “solely ” in subsection 1237A(1) bears its ordinary meaning: “the word ‘solely‘ means ‘only’ or ‘to the exclusion of all else”. The AAT held:
“There is nothing in sub-section 289(1) [s. 1237A(1)] which indicates that any meaning should be given to "solely” other than its ordinary meaning. Applying those ordinary meanings to the sub-section mean that the Secretary must waive the right to recover the proportion of the debt that is attributable only to the Commonwealth's administrative error. The Secretary's duty to waive does not extend to those debts which are attributable to errors or other factors which are independent of the Commonwealth's administrative error. It makes no difference that those other errors or factors are minor.”
87. It is clear from the evidence that Mr Smith did not report his income, which was variable, or his correct employment status to Centrelink in a timely manner and within 14 days of having earned it as required, but instead provided Profit and Loss statements on a quarterly basis, presenting his income as net profits or losses resulting after deduction of his business expenses. Mr Smith’s actual income from employment in the period 3 May 2003 to 1 February 2008 was determined following data matching with the ATO.
88. The Tribunal finds Mr Smith’s debt primarily arose because he did not report all his income to Centrelink in a correct and timely fashion and therefore the overpayment is not attributable solely to administrative error.
Waiver - Special Circumstances
89. Section 1237AAD of the Act provides for the possibility of waiving all or part of a debt on the grounds of special circumstances.
90. The term “special circumstances” is not defined in the Act however it has been extensively considered in case law and the most frequently cited cases are:
91. Beadle and Director- General of Social Security (1984) 6 ALD 1 where the Administrative Appeals Tribunal stated as follows:
...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 upon 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…
92. Groth and Secretary Department of Social Security (1995) FCA 1708 where the Federal Court stated as follows:
...The phrase "special circumstances", it has been said, although imprecise is sufficiently understood not to require judicial gloss...it is sufficient to observe that it would require something to distinguish Mr. Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this 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. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied ...
Re Ivovic and Director General of Social Services (1981) 3 ALN N95 where the Administrative Appeals Tribunal stated as follows:
…The reference to special circumstances “by reason of which” a person liable “should be released” requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes…Thus whilst keeping the dominant principle of [recovery of debt] in mind, [the decision maker] must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise…
Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25 where the Federal Court stated as follows:
…There is less overstatement if the words “unusual” or “uncommon” are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case…
Timothy Davy and Secretary Department of Employment and Workplace Relations 2007 AATA 1,114 where Deputy President Forgie stated at paragraph 80 in part as follows:
…“special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances…that make it desirable to waive”. That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr. Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it… He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement… The system of administration of the Social Security Act does not visit any injustice for many if not all social security recipients but it did not lead to any injustice or unfairness on Mr. Davy that is not visited, or potentially visited, upon all other recipients of social security payments under the Act. Therefore, I am not satisfied that there are special circumstances that make it desirable to waive the debt under s 1237AAD of the Act…
93. The Tribunal notes the Tribunal’s decision in George and Ors and Secretary Department of Families, Community Services and Indigenous Affairs and Ors [2007] AATA 1456 where Senior Member Handley stated at paragraph 54:
…But even if special circumstances were considered – especially because of the prohibition in consideration of financial hardship – I could not be satisfied as a matter of law that special circumstances do exist. As was decided in Groth v Secretary Department of Social Security (1995) 37 ALD 797 that an applicant’s case must be distinguished from the usual or ordinary case which was decided as being a case which was unfair, unintended or unjust and which possessed some features out of the ordinary. Illness is not a circumstance which is special. It is unfortunately common. In some circumstances illness can be severe and can cause considerable disruption and dislocation – no less in the present circumstances….
94. Mr Smith told the SSAT that his marriage broke down on 1 July 1999, which resulted in considerable financial outlays. He bought his onsite park home, or donga, in September 1999 for $35,000, and used his credit card to set up desktop publishing facilities. He pays rent for his site at the caravan park.
95. In 2002 Mr Smith had coronary bypass surgery and removal of a colon cancer, and he currently suffers from emphysema, pulmonary fibrosis and DVTs in his legs. Mr Smith told the SSAT that he has $13,500 owing on his Visa Card and $3,500 on his Mastercard. His car, which is 47 years old and wearing out, was damaged in a recent accident and he bought another car for $1,000 to keep him on the road.
96. It is the Tribunal’s opinion in light of the above decisions that Mr Smith’s circumstances while clearly difficult are not unusual or uncommon and that nothing unfair, unjust or unintended occurs as a result of the application of the legislation, and that therefore Mr Smith’s debt cannot be waived pursuant to section 1237AAD of the Act.
97. It is clear that the debt arose due to Mr Smith’s failure to declare his income from employment on the correct basis and to advise that the income noted on the section 68 notices, and used by Centrelink to assess his eligibility to Age Pension, was incorrect. In doing so Mr Smith failed to comply with the provisions of the Act. The Tribunal therefore finds that section 1237AAD of the Act cannot apply and all or part of the debt cannot be waived on the grounds of special circumstances, even if special circumstances were found to exist. The Tribunal finds however, that there are no special circumstances that make it desirable to waive the debt under section 1237AAD.
Write Off
98. Pursuant to section 1236 of the Act, the Secretary may write off a debt. Section 1236.(1A) provides 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 havebeen made to locate the debtor; or
(d) it is not cost effective for the Commonwealth to take action to recover thedebt.
99. Mr Smith continues providing copy to the Community Newspapers and The Sunday Times, however, he now does so under changed arrangements.
100. Mr Smith is currently in receipt of age pension. From 28 January 2009 Mr Smith has been repaying the overpayment at an amount of $50.00 per fortnight. Mr Smith was previously repaying the debt at $100 per fortnight.
101. The Tribunal finds that Mr Smith’s debt is recoverable in accordance with the provisions of section 1236 of the Act as Mr Smith’s whereabouts are known and he is earning a regular albeit small income as well as receiving age pension. It is therefore inappropriate to write off recovery of his debt as none of the provisions of subsection 1236(1A) of the Act apply.
Decision
102. The Tribunal:
102.1Affirms that part of the Social Security Appeals Tribunal (SSAT) decision dated 15 July 2008 that found that there had been an overpayment of age pension to the applicant in the relevant period arising from his failure to properly declare the nature of his employment with Community Newspapers and the income derived therefrom;
102.2Remits the matter to the decision maker to recalculate the amount of such overpayment in accordance with the Tribunal’s decision; and
102.3Sets aside that part of the SSAT decision that found that there had been an overpayment of age pension to the applicant in the relevant period on the grounds that he had failed to properly declare the nature of his income from The Sunday Times, and finds that the applicant was not an employee of The Sunday Times.
I certify that the 102 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member
Signed: ...(sgd) T Freeman.................
AssociateDate/s of Hearing 15 June 2009
Date of Decision 29 June 2009
Counsel for the Applicant Self represented
Counsel for the Respondent Ms C Wallwork
Principal Legal Services Officer
Centrelink Legal Services, Perth
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