Nguyen; Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and
[2007] AATA 2075
•20 December 2007
`
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 2075
ADMINISTRATIVE APPEALS TRIBUNAL )
) No S 200600250
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF
FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGNEOUS AFFAIRS
Applicant
And
VO NGUYEN
Respondent
DECISION
Tribunal Senior Member R W Dunne Date20 December 2007
PlaceAdelaide
Decision 1. The Tribunal sets aside the decision under review and, in place of that decision, directs that the matter be remitted to the applicant for re-calculation of the Debt that is recoverable in accordance with the Tribunal’s findings, having particular regard to the provisions of s 1073(1) of the Act.
2. The Tribunal reserves liberty to the parties, within 10 days of the date of this decision, to apply in relation to the final quantification of the Debt.
..............................................
R W DUNNE
(Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – gambling receipts as “income” under the Social Security Act 1991 – Disability Support Pension – cancellation of benefit – recovery of debt – waiver or write-off of debt – whether special circumstances – decision set aside
Social Security Act 1991 ss 8, 1072, 1073(1), 1075(1), 1223(1), 1236(1) and (1A), 1237A(1), 1237AAD
Social Security (Re-write) Amendment Act 1991Income Tax Assessment Act 1997
Re Secretary, Department of Employment and Workplace Relations and Ruan and Anor (2007) 97 ALD 229
Re Denhard and Secretary, Department of Families, Community Services and Indigenous Affairs and Anor [2007] AATA 1165
Secretary, Department of Social Security v Ekis (1998) 52 ALD 246
Haldane-Stevenson v Director-General of Social Security (1985) 7 ALD 467
Secretary, Department of Social Security v McLaughlin (1997) 48 ALD 536
Watson v Secretary, Department of Family and Community Services (2003) 74 ALD 77
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Riddell v Secretary, Department of Social Security (1993) 30 ALD 31
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 44 AAR 436
Secretary, Department of Social Security v Hales (1998) 51 ALD 695Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
REASONS FOR DECISION
20 December 2007 Senior Member R W Dunne 1. Mr Vo Nguyen is the respondent in this case (“respondent”). He was in receipt of a Disability Support Pension (“DSP”) during the relevant period, 13 November 2003 to 26 April 2006 (“Relevant Period”). Centrelink (“applicant”) undertook an investigation into his financial circumstances and his gambling activities and cancelled the DSP payments being made to him. Centrelink also decided to raise a debt of $27,473.25 for overpayment of DSP for the Relevant Period. The respondent sought a review of the decision and on 27 June 2006 an Authorised Review Officer reviewed and affirmed the decision of the original decision-maker.
2. Mr Nguyen applied for review to the Social Security Appeals Tribunal (“SSAT”). On 20 July 2006, the SSAT set aside Centrelink’s decision under review on the basis that there was no income earned, derived or received by Mr Nguyen, for Centrelink purposes, from his gambling activities or from any other activity in the Relevant Period.
3. On 15 August 2006, the applicant applied to this Tribunal for a review of the SSAT decision.
4. At the hearing, Ms Katherine Bean (of counsel) appeared on behalf of the applicant and Mr Mark O’Loughlin (of counsel) appeared on behalf of the respondent. The Tribunal received the following documents into evidence:
·the T documents, the supplementary T documents and the further supplementary T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Exhibits A1, A2 and A3 respectively);
·record of vehicles previously registered to respondent’s name (Exhibit A4(a);
·record of vehicles owned by respondent (Exhibit A4(b);
·the witness statement of the respondent dated 24 April 2007 (Exhibit R1); and
·the witness statement of the respondent’s son (Mr Duy Phong Nguyen) dated 25 April 2007 (Exhibit R2).
issues for the tribunal
5. The issues for the Tribunal’s consideration are:
(a)whether Mr Nguyen’s receipts from gambling activities are “income” for the purposes of s 8 of the Social Security Act 1991 (“Act”) during the Relevant Period;
(b)whether Mr Nguyen was overpaid DSP in the Relevant Period;
(c)if there has been an overpayment of DSP, whether the debt involved (“Debt”) is recoverable by the applicant; and
(d)if the Debt is recoverable by the applicant, are there grounds to waive or write-off all or part of the Debt.
legislation
6. The following provisions of the Act relevantly apply to the issues before the Tribunal:
“8(1) In this Act, unless the contrary intention appears:
…
‘earned, derived or received’ has the meaning given by subsection (2).
…
‘exempt lump sum’ has the meaning given by subsection (11).
…
‘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; or
(b) a periodical payment by way of gift or allowance; or
(c) a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).
...
‘income amount’ means:
(a) valuable consideration; or
(b) personal earnings; or
(c) moneys; or
(d) profits;
(whether of a capital nature or not).
…
‘ordinary income’ means income that is not maintenance income or an exempt lump sum.
…
Earned, derived or received
8(2) A reference in this Act to an income amount 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).
…
Excluded amounts—general
8(8)The following amounts are not income for the purposes of this Act:
…
(z)a periodical payment by way of gift or allowance, or a periodical benefit by way of gift or allowance, from the person’s father, mother, son, daughter, brother or sister;
…
8(11) An amount received by a person is an exempt lump sum if:
(a)the amount is not a periodic amount (within the meaning of subsection (11A)); and
(b)the amount is not a leave payment within the meaning of points 1067G-H20, 1067L-D16 and 1068-G7AR; and
(c)the amount is not income from remunerative work undertaken by the person; and
(d)the amount is an amount, or class of amounts, determined by the Secretary to be an exempt lump sum.
Note:Some examples of the kinds of lump sums that the secretary may determine to be exempt lump sums include a lottery win or other windfall, a legacy or bequest, or a gift – if it is a one-off gift.
…
1072 General meaning of ordinary income
A reference in this Act to a person’s ordinary income for a period is a 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.
1073 Certain amounts taken to be received over 12 months
1073(1 )Subject to points 1067G-H5 to 1067G-H20 (inclusive), 1067L-D4 to 1067L-D16 (inclusive), 1068-G7AA to 1068-G7AR (inclusive), 1068A-E2 to 1068A-E12 (inclusive) and 1068B-D7 to 1068B-D18 (inclusive), if a person receives, whether before or after the commencement of this section, an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part; and
(b) is not:
(i) income in the form of periodic payments; or
(ii)ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum.
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.
…
1075 Permissible reductions of business income
1075(1)Subject 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.
…
1223 Debts arising from lack of qualification, overpayment etc.
1223(1)Subject to this section, if:
(a) a social security payment is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
…
1236 Secretary may write off debt
1236(1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
1236(1A)The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
…
1237A Waiver of debt arising from error
Administrative error
1237A(1)Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
…
1237AAD Waiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii)failing or omitting to comply with a provision of this Act or the 1947 Act; and
(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.”
background and evidence
7. Mr Nguyen is 52 years of age. He applied for a DSP in April 2003 when he was single. At that time, he gambled at the Adelaide Casino and other venues. He stopped gambling in April 2006 when his wife, who he married in Japan, came to Australia. She came with their small child. Sometimes he would win at gambling, but overall he did not make any money. When he did win, which he would take in cash or by cheque, he bought motor vehicles or used the winnings for spending money. Mostly, he put his winnings into the bank and did not keep them at home or on his person. In May 2003 and over a period of 2 years, Mr Nguyen’s son (Mr Duy Phong Nguyen) lent him some money. He put this money into the bank with the intention of sponsoring his family to come to Australia. He also used some of the money for gambling. He said he would repay the money to his son when he was able to. This was because, with Vietnamese people, money loaned was not important between a father and a son. In 2005 or 2006 he also borrowed money ($40,000) from a friend, Mr Anh Tuan Nguyen. He told his friend that he would repay the money to him in 3 or 6 months time. Again, he put the money into the bank and also used some for gambling. He won from gambling, put his winnings into the bank and accumulated them, then later withdrew the money and repaid it to his friend.
8. In the period from April 2003 to April 2006, Mr Nguyen owned (or bought and sold) 5 or 6 motor vehicles. When he won at the Casino and a vehicle was cheap, he would buy it. Then, when he lost money from gambling he would have to sell the vehicle. The same applied with the other motor vehicles he bought from time to time. When he sold those vehicles, he used the proceeds for gambling. He did not think it was necessary to inform Centrelink about his gambling because he did not think his winnings were income, and overall he made a loss from gambling. His only family income at the moment was from Centrelink and was $220 a week. This was not enough for his family to live on and he had to go without cigarettes, beer and travel in his motor vehicle.
9. In cross-examination by Ms Bean, Mr Nguyen said that he borrowed money from his son twice – one amount was $20,000 and the other was $30,000. He could not remember when the loans were made, but thought they were in 2003 and 2004. His son did not give him all the money at once. Sometimes he gave him $10,000, sometimes $5,000, sometimes $7,000. He borrowed from his son at this time because he wanted to sponsor his mother to come to Australia.
10. When asked by Ms Bean why he had borrowed $40,000 from his friend in 2005 and 2006, Mr Nguyen said he wanted to put it into the bank to sponsor his wife and he would pay it back when his wife had arrived in Australia. He had previously sponsored his mother to come to Australia and the Department of Immigration had told him that, if he had money, the application for sponsorship would be easier. His mother had returned to Vietnam and had passed away there in 2006. He had also sponsored his younger brother and an older sister. Ms Bean referred Mr Nguyen to his witness statement (Exhibit R1) where, in relation to the loan of $30,000, he said his son initially gave him $10,000 in cash and then later on he gave him $20,000. Mr Nguyen could not remember what he had said in his statement. He could remember that his son had lent him $20,000 and then $30,000, which had been given to him in small amounts of $10,000 and $5,000.
11. Ms Bean asked Mr Nguyen about the motor vehicles he had purchased. He said he always paid cash for them. When he won money at the Casino he would put it into the bank and when he found a vehicle he would use that money to buy it. But, if he had cash available and wanted to buy a motor vehicle, he would only withdraw the difference from the bank. However, the difference might be withdrawn in several instalments over several days. He acknowledged that, in his witness statement, he had said he had sold 5 vehicles for approximately $9,000 each. However, when questioned further, he said he sold the vehicles for different amounts, which averaged out to approximately $9,000 each. Ms Bean referred to the list of vehicles contained in Exhibit A4(a). Mr Nguyen acknowledged that he had purchased the following vehicles on the dates and for the prices mentioned:
Date of Purchase Vehicle Price
August 2003 Toyota $500
March 2004 Honda $7,000
April 2004 Audi $15,000
August 2004 Toyota $8,000June 2005 Holden $1,000
He acknowledged further that the above vehicles were the only vehicles that he had bought and sold between April 2003 and March 2006. When questioned by the Tribunal about the sale of the vehicles, he said he had sold them for a total average price of $45,000, but had only made a profit on the sale of one of the vehicles.
12. In relation to his gambling activities, Mr Nguyen said there were times when he came out in front. However, he did not think he needed to declare the winnings from his activities because “it wasn’t income from work”. He said he was not aware that he had to declare income, other than income from work. He acknowledged that, apart from the loans that he said had been made to him and the proceeds from the sale of the motor vehicles, the rest of the money deposited into his bank accounts was from gambling. When questioned by the Tribunal, he said there were occasions when he drew money out of his bank account, without gambling or buying motor vehicles, and simply put it back into the bank. There were times when he wanted to buy a motor vehicle and withdrew the money, but was unable to buy the vehicle and he returned the money to his bank account. With the loan from his son in 2003, he said he deposited it into his account in small amounts, but he could not remember the amounts involved. In relation to the repayment of the loan, he said he paid his son back in 2 or 3 months, but again could not remember the amounts involved. Nor could he remember if the amounts were withdrawn from his bank account or came from gambling winnings. He had repaid both of the loans from his son, but could not remember when he had repaid them or the amounts of the instalments. However, he was able to say that the loan he had obtained from his friend and the loans from his son were all received in cash. He received the $40,000 loan from his friend in various sums during the period between 19 December 2005 and 31 March 2006 and was able to repay it within a few months. Although he had repaid the loan, he could not remember when the instalments (or the final repayment) had been made. He admitted that he had withdrawn money from the bank in order to repay his friend.
13. Ms Bean questioned Mr Nguyen about his wife. He admitted that she had been under an assurance of support from a close friend. However, the assurance had not been provided at the time he had borrowed the $40,000 from his friend. This loan had been repaid to his friend before his wife had arrived in Australia. When asked by Ms Bean about his financial position, Mr Nguyen agreed that he currently received $281.40 (net) fortnightly in benefits from Centrelink.
14. The evidence of Mr Nguyen’s son, was that, in about May 2003, he had loaned his father $20,000 in cash in two or three instalments and the loan had been repaid. The loan money had come from savings, gambling and borrowings from his friends. He could not recall whether he used money from the bank to fund the loan. He made a further loan of $30,000 to his father in 2004. Again, the loan was made in two or three instalments.
15. In cross-examination, the witness admitted that the first loan had come partly from savings and that the second loan had been funded by the first loan repayments, together with additional borrowings. The loans had not come from his bank account, but from savings, “lunch money” and money from his parents. He did not keep the money in the bank, but in a “piggy bank” at home. He had kept the majority of the $20,000 and $30,000 at home, but had to borrow more to make the loans to his father. With the first loan, about $16,000 or $17,000 had been his own money. When asked why he had made the loans in instalments, he said he had not wanted to give his father all the money at once. With the first loan, the instalments had been made during the month of May. He had travelled to Adelaide and gave the money to his father, and this occurred on several occasions in the course of the month. The witness was unable to recall what he was doing in Melbourne in 2003 and in May 2004. He could not recall when or over what period his father had repaid the loans, nor could he recall whether the repayment had been in one lump sum or in smaller instalments. The witness admitted that he had been in receipt of Youth Allowance during 2003 and 2004.
consideration and application of the law
16. The critical issue to be determined in the present case, as was the case in the recent decision of this Tribunal in Re Secretary, Department of Employment and Workplace Relations and Ruan and Anor (2007) 97 ALD 229, is whether the respondent’s gambling receipts are “income”, and this means “income” for the purposes of the Act and not for other purposes, such as the Income Tax Assessment Act 1997. The SSAT found that there was no income earned, derived or received by Mr Nguyen for Centrelink purposes from his gambling activities or from any other activity in the Relevant Period. If Mr Nguyen’s gambling activity was regarded as “an ordinary business activity” and if his bank deposits constituting gambling winnings were treated as potentially amounting to income, then the cost of producing that income and any losses associated with it should be taken into account. This would be the case here, as it would with any other business activity. If his gambling activity was not regarded as an ordinary business activity, then the “winnings” would still not be income because they would be windfall gains.
17. Ms Bean submitted to the Tribunal that, on the evidence (namely the bank statements appearing at Exhibit A1 at pages 175-219, 230-244 and 291), deposits totalling approximately $311,000 (apart from Centrelink payments) were made into his bank accounts by the respondent. Mr Nguyen admitted that the proceeds from his gambling activities were, from time to time, paid into his bank accounts. In the circumstances and in the absence of evidence to the contrary, the Tribunal is satisfied that, subject to the findings in paragraph 21 of these reasons, the bank deposits referred to and quantified by Ms Bean arose from Mr Nguyen’s gambling activities. However, it was also Mr Nguyen’s evidence that he had borrowed money from a friend (Mr Anh Tuan Nguyen) and from his son. In his witness statement (Exhibit R1), Mr Nguyen said:
“10.I was aware that my wife was due to emigrate to Australia in April of 2006. I had previously sponsored my mother and two of my siblings coming to Australia. Based on this and on what I had been told by various other people I know who had sponsored family coming to Australia, I was under the impression that I would need to demonstrate that I had sufficient funds in my account to support my wife. At this point in time, I had no money and so I approached my friend Anh Tuan Nguyen to ask if I could borrow some money.
11.Over the period from 19 December 2005 through 31 March 2006, my friend lent me numerous sums of anywhere between $5000 to $10,000. At the end of the period, this totalled $40,000.00.
12.When my friend provided these sums of money I would deposit them in my bank account.”
18. The Tribunal was provided with a witness statement from the respondent’s friend, Mr Anh Tuan Nguyen and a statutory declaration, containing similar information, appears in the T documents (Exhibit R1, T24). However, it did not pass without notice that the witness statement was not tendered and his friend was not called by the respondent to give evidence. Moreover, Mr Nguyen’s statement, that he borrowed from his friend so he could show he had sufficient bank account funds to sponsor his wife coming to Australia, was not convincing. It appears a separate assurance of support had been provided in respect of his wife in circumstances which suggested that his financial position was largely irrelevant to his wife’s ability to immigrate to Australia. Moreover, he conceded that he used part of the loan money from his friend for gambling, which was to some extent inconsistent with what he said was the main purpose of the loan. Then, his oral evidence about the actual receipt of the loan funds and the instalments involved was not consistent with what he had said in his witness statement. Overall, Mr Nguyen was unable to give any clear and consistent evidence as to how much he received by way of loan instalments and when he received them. It was also not possible to confirm the actual receipt of the loan funds, during the period in his statement that he said he received them, from an analysis of his bank statements.
19. In relation to the loans totalling $50,000 that he said he obtained from his son, his evidence was again inconsistent. In his witness statement he said:
“6.In or about May 2003, I borrowed from my son Duy Phong Nguyen an amount of $20,000.00. I borrowed this amount in smaller sums of approximately $5,000 to $7,000.00. When my son would lend me this money, I would deposit most of it in my account. I would use some parts of the monies that my son lent me to gamble.
7.Over the next few months I repaid this $20,000.00 in a couple of instalments to my son.
8.After I repaid this amount, in or about May 2004, I again borrowed $30,000.00 from my son. He initially gave me $10,000 in cash and then later on he gave me $20,000.00.
9.When I received these monies from my son, I deposited them into my bank account. Again within a few months I repaid these monies to my son.”
Then, when he gave his oral evidence, it was uncertain and he often seemed unable to recall how and when he actually received the loan moneys. As to the evidence of his son, it was most unconvincing. Although he could recall the amounts of the two loans, the witness had little recollection of the details of the loans. He said that the bulk of the first loan of $20,000 had come from savings that he had kept at home. The rest he had obtained from gambling winnings and borrowings. Then, the second loan of $30,000 was largely made from the money repaid from the first loan, again kept at home. Like the respondent, his oral evidence, such as it was, differed noticeably from what he had said in his witness statement (Exhibit R2). Given the significant total of the loans he had made to his father, it was surprising that he was unable to recall the amounts of the instalments involved and the circumstances in which he travelled to Adelaide, on several separate occasions, to deliver the loan moneys in cash.
20. Overall, the Tribunal found the evidence from the respondent and his son to be far from satisfactory. Both had given witness statements that had been made only a matter of 2 months before the hearing and contained information which they had acknowledged to the Tribunal was correct. However, on most occasions, Mr Nguyen could not recall what he had said in his statement and his oral evidence was inconsistent with it. On other occasions, when questioned about the loans from both his son and his friend, he was unable to remember much about the circumstances of the loans, such as the number and amounts of the instalments (both when received and when repaid), when they were made and how, at the various times, the repayment instalments were funded. He said he had received the first loan of $20,000 from his son in May 2003 and that he banked it with the intention of sponsoring his family to come to Australia. There is no evidence of this loan money being deposited into his bank account during the April to June 2003 period (Exhibit A1, T11 at page 176) and this was the position until September 2003. He said he had received and banked the loan of $40,000 from his friend between November 2005 and March 2006. Again, although some significant deposits and withdrawals were made into and from his bank account during this period (Exhibit A1, T11 at pages 211-218), nothing like $40,000 remained in the account to enable the sponsorship of his wife to Australia. In the case of Mr Nguyen’s son, he could recall very little about the loans he had made to his father, other than the principle amounts involved and that he had made them and they had been repaid. When considered together, his witness statement and what he said before the Tribunal was of little evidentiary value. For all these reasons, the Tribunal is unable to accept the evidence of Mr Nguyen and his son in relation to the loans of $50,000 (from his son) and $40,000 (from his friend, Mr Anh Tuan Nguyen).
21. The respondent’s evidence concerning his purchase and the sale of 5 motor vehicles, during the period from August 2003 to March 2006, was intriguing. As the Tribunal understands it, his evidence was that he purchased the 5 motor vehicles at various prices, ranging from $500 to $15,000, and then sold them at an average price of $9,000 each. When cross-examined, he agreed with the purchase price of each vehicle (as disclosed in Exhibit A4(a)) and with the total purchase prices of the vehicles of $31,500. However, he volunteered that he only made a profit on the sale of one of the vehicles and that that profit was $500. On this basis, the total of the sale prices of the vehicles, on Mr Nguyen’s evidence, would be (or would be not more than) $32,000, which was significantly less than the figure of $45,000 that he had given in his earlier evidence. In the circumstances, the Tribunal in unable to accept that the amount that might be attributable to the sale by Mr Nguyen of the 5 motor vehicles during the period from August 2003 to March 2006, and which formed part of the bank deposits totalling approximately $311,000, could be more than $32,000, and so finds.
Are Mr Nguyen’s gambling receipts “ordinary income”?
22. In considering this question, the decision of this Tribunal in Re Ruan (supra) is apposite. In relation to a person, the definition of “income” (and hence “ordinary income”) in s 8(1) of the Act is expressed in extremely wide terms. It includes “an income amount earned, derived or received by the person for the person’s own use or benefit”. The expression “income amount” in the definition of “income” means valuable consideration or personal earnings or moneys or profits, whether of a capital nature or not. The expression “earned, derived or received” in the definition of “income” in s 8(1) is also very broadly defined and includes any “income amount” which is “earned, derived or received”. The latter expression is amplified in s 8(2) to refer to amounts earned, derived or received “ … by any means and … from any source (whether within or outside Australia)”. As was said by Senior Member Dr K S Levy RFD in Re Denhard and Secretary, Department of Families, Community Services and Indigenous Affairs and Anor [2007] AATA 1165 (at paragraphs 38 and 39):
“38. The statutory definition of income clearly encompasses ‘…as wide a range of categories and sources of income as possible, thus giving full scope to the exclusionary provisions of the Act…’ (see Rose v Secretary, Department of Social Security (1990) 21 FCR 241 at 243). The definition also extends to gifts. There is also no necessity that the amount received also involves a net gain for the recipient (see Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35 at page 44).
39. The test to be applied in determining whether amounts received are ‘income’ within the meaning of the definition in the Act, is to be an objective test (Dellis v Secretary, Department of Social Security (1990) 21 ALD 252 at page 253. …”
23. The expression “ordinary income” excludes certain amounts (which are not presently relevant) and “an exempt lump sum” (see s 8(11)). The Tribunal notes that gambling receipts do not comprise “an exempt lump sum” as defined. Moreover, although examples of lump sums are given in the Note to s 8(11) in the Act, such as a lottery win or other windfall, a legacy or bequest, or a gift (if it is a one-off gift), gambling receipts are not included. Given the extent of the gambling activities in Mr Nguyen’s case, it would in the Tribunal’s view be difficult to describe his gambling receipts as “one-off” receipts or gifts. The Tribunal is also satisfied that the Secretary has not determined that gambling receipts constitute exempt lump sums under s 8(11)(d) of the Act.
24. It follows from what has been said in the previous paragraph that Mr Nguyen’s gambling receipts are “moneys” earned, derived or received by him from his gambling activities. On his evidence, he has used the receipts to purchase motor vehicles, which he then sold, for day-to-day spending and for further gambling. In relation to the expression “own use or benefit”, it is not defined in the Act. In these circumstances, the expression has the meaning it bears in ordinary speech and is a question of fact (see Secretary, Department of Social Security v Ekis (1998) 52 ALD 246 at 251 per Drummond J). Given the use to which he put the gambling receipts, the Tribunal is satisfied (and so finds) that the receipts have been earned, derived or received by Mr Nguyen for his “own use or benefit”. The receipts do not represent a one-off windfall, nor are they amounts which could not be foreseen or predicted or expected or which are unlikely to occur again. There has been a course of conduct by Mr Nguyen which takes his gambling receipts outside the ambit of the exempt lump sum provisions in s 8(11).
25. In the statement of facts, issues and contentions of the respondent, it was submitted that the relevant authority relating to allowable set-offs against income (that is, whether the reference to “income” in s 8(1) is to “gross” or “net” income) was Haldane-Stevenson v Director-General of Social Security (1985) 7 ALD 467 and Secretary, Department of Social Security v McLaughlin (1997) 48 ALD 536. The issue of whether “gross” or “net” income applied for s 8(1) purposes was addressed in amendments to the income definitions in the Act in 1991. The Social Security (Rewrite) Amendment Act 1991 introduced the precursor to the current s 1072, which defines “ordinary income”. The Explanatory Memorandum that accompanied the enactment of the Bill states as follows:
“A new Division 1AA is to be inserted before Division 1 of Part 3.10 of the Principal Act. This will deal with the concept of ordinary income for income assessment purposes. It will make it clear that ordinary income for social security purposes generally means gross income but that certain expenses incurred in deriving income from a business, including adjustments for decreases in the value of stock on hand, can be allowed as ordinary income deductions but only from ordinary income derived from the business concerned and not from any other source.” [emphasis added]
26. The amendments addressing the distinction between “gross” and “net” income were considered in Ekis (supra) where, at page 249, Drummond J observed:
“… At one stage, the Social Security Act did not contain any provision corresponding to ss 1072 and 1075 and the wide-reaching definition of ‘income’ in the Act was interpreted as meaning net realised income: see Haldane-Stevenson v Director-General of Social Security (1985) 9 FCR 73 at 75 and Secretary, Department of Social Security v Garvey (1989) 91 ALR 245 at 249. In 1991, however, new provisions, including ss 1072M and 1072P, which correspond to ss 1072 and 1075, were inserted in the Social Security Act by Sch 1 to the Social Security (Rewrite) Amendment Act 1991 (Cth). These amendments changed, in a radical way, the entitlement of a person to an age pension where that person was in receipt of income from other sources. Save only for a few specific classes of outgoing, of which outgoings incurred by the pensioner in carrying on his or her business were one, a person's pension entitlement thereafter had to be reduced by reference to the gross amount, without any reduction, of the pensioner's ordinary income from all sources. The purpose of an income-related pension such as the age pension is to ensure that pensioners in the lower income brackets receive a measure of social security: Read v Commonwealth (1988)167 CLR 57, per Brennan J at 68. It would appear that the assumption underlying this changed approach was that where a pensioner had another source of income, the outgoings incurred in earning that income were, in general, likely to be relatively small in total amount and, for that reason, should be ignored in determining the person's pension entitlement. An exception was made, however, in relation to expenses incurred in earning income from the carrying on of a business; the assumption would appear to be that, in contrast to the position generally obtaining in respect of deriving income from other sources, eg, work as an employee, a person would only derive a gross amount of income from carrying on a business at the cost of having to incur what might be substantial expenses, so that it would be unfair to ignore those expenses in determining such a person's pension entitlement.” [emphasis added]
27. In Watson v Secretary, Department of Family and Community Services (2003) 74 ALD 77, Finn J also observed at [18]:
“18 My own view can be put shortly. It is unnecessary for me to outline at any length the effect of ss 1072 and 1075(1) of the SS Act. I would merely note the following. It is well accepted that, as a result of the amendment that introduced the precursors of ss 1072 and 1075 into the SS Act in 1991, ordinary income for social security purposes means gross income save in certain specified cases. One such case is where income is derived from a business in which case certain expenses incurred relating to that business can be deducted from the ordinary income of the business. Those expenses, though, cannot be deducted from income from any other source: see generally, Secretary, Department of Social Security v Ekis (1998) 85 FCR 382; see also Social Security (Rewrite) Amendment Bill 1991, Explanatory Memorandum, p181; Secretary, Department of Family and Community Services v Cantlay (2000) FCA 345.”
28. Following the 1991 amendments, and as the Tribunal accepted in Re Ruan, s 1072 now has the effect that “ordinary income” means gross income from all sources without deduction, other than allowable deductions against business income as provided for by s 1075. Thus, the whole of Mr Nguyen’s gambling receipts are part of his “ordinary income” for the purposes of the Act, unless his gambling activities can properly be characterised as “carrying on a business”. If this is the case, he will be able to offset allowable deductions against the business income pursuant to s 1075 of the Act, which includes deductions which are only allowable under the Income Tax Assessment Act 1997. The expression “carries on a business” in s 1075(1) is not defined in the Act. Again, as was said by Drummond J in Ekis, the expression has the meaning it bears in ordinary speech and is a question of fact. Although Mr Nguyen gave no evidence in support of the proposition that he “carried on a business”, the Tribunal is unable in any event to accept that this was the case. There was no suggestion that he kept records of his gambling activities, there appeared to be no system or regularity in approach and, as the SSAT noted, he was not carrying on a professional activity to make a profit. In the circumstances, the Tribunal finds that Mr Nguyen’s gambling activities do not meet the requirements of s 1075(1) of the Act.
Debts due to the Commonwealth
29. Having regard to the evidence before it, the Tribunal is satisfied that the respondent was not entitled to receive the DSP (or the extent of the DSP) paid to him during the Relevant Period. As has been adverted to in paragraph 1 of these reasons, there has been an overpayment and he is indebted to the Commonwealth in the amount of $27,473.25.
Recovery of the debts due to the Commonwealth
30. Under s 1236(1A) of the Act, the applicant may write-off a debt, for a stated period or otherwise, only in the following situations:
(a) The debt is irrecoverable at law. In the present case, the Tribunal is satisfied that the applicant is able to recover the Debt at law.
(b) The debtor has no capacity to repay the debt. The Tribunal does not have before it particulars of the respondent’s assets or his current financial position. Nevertheless, there is no evidence that the respondent does not have the capacity, albeit over a period of time, to repay the Debt.
(c)The debtor’s whereabouts are unknown. This exception is not applicable in the respondent’s case.
(d) It is not cost effective for the Commonwealth to take action to recover the debt. Although no submissions were put to the Tribunal by Ms Bean in relation to this aspect, the Tribunal accepts that it is cost effective for the Commonwealth to take action (or to continue to take action) to recover the Debt.
31. It follows that the Debt is not capable of being written-off, for a stated period or otherwise, pursuant to s 1236(1A) of the Act.
Waiver under s 1237A(1) of the Act
32. The Tribunal is satisfied that the Debt is not attributable to an administrative error by the applicant. In these circumstances, the Debt (or the remainder of the Debt) should not be waived under s 1237A(1).
Special circumstances under s 1237AAD of the Act
33. Apart from his argument that his gambling receipts were not income (or taxable income), Mr O’Loughlin’s main contention on behalf of the respondent was that the Debt (or the remainder of the Debt) should be waived under s 1237AAD of the Act, on the grounds that there were “special circumstances” that made it desirable to waive. In this regard, the Tribunal notes that the special circumstances must be other than financial hardship alone. In his oral submissions, Mr O’Loughlin put to the Tribunal that the fact the respondent used all of his funds for gambling, which meant they were never available to him in any real sense, makes his case one of special circumstances. Then, in the respondent’s statement of facts, issues and contentions, it was asserted that the respondent had chronic health problems for which he was taking medication and he was suffering severe stress as a result of the proceedings before the Tribunal and his financial position. In addition, his wife was unable to speak English and, in her role as carer for the respondent and their young child, was unable to look for work.
34. As was mentioned by this Tribunal in Re Ruan, the expression “special circumstances” has been considered on numerous occasions by Courts and Tribunals. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1, the Tribunal said (at page 3):
“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.” [emphasis added]
35. In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court’s decision in Re Beadle, observed that special circumstances:
"… would require something to distinguish Mr Groth’s 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. …”
36. Then, in Riddell v Secretary, Department of Social Security (1993) 30 ALD 31, the Full Court of the Federal Court said (at page 38):
"Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other."
37. A recent analysis of the meaning of “special circumstances” was given by Besanko J in the Federal Court in Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 44 AAR 436. The learned judge referred to the comments of French J in Secretary, Department of Social Security v Hales (1998) 51 ALD 695 and of Branson J in Ryde v Secretary, Department of Family and Community Services [2005] FCA 866. At paragraphs 30 and 32 of his reasons he said:
“30 In Secretary, Department of Social Security v Hales (supra) French J considered the provisions of s 1237AAD. One particular argument his Honour was required to consider was whether the reference in s 1237AAD(b) to ‘other than financial hardship alone’ meant that there must be financial hardship before a finding of special circumstances can be made. His Honour rejected that argument and in the course of doing so made some general observations as to the concept of special circumstances. His Honour said (at 162):
‘The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special. But as a matter of grammar and ordinary logic, the exclusion of financial hardship alone as a special circumstance does not mandate its inclusion in the range of matters constituting such circumstances for the purpose of enlivening the Secretary's discretion.
...
The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.’
…
32 In Ryde v Secretary, Department of Family and Community Services (supra) Branson J considered the provisions of s 1237AAD and in particular whether the Tribunal in that case had erred in concluding that special circumstances meant circumstances which were ‘unusual, uncommon or exceptional’. Her Honour referred to the first passage from the reasons for judgment of the Full Court in Beadle set out in [28] above. She also referred to the following passage in Jess v Scott (1986) 12 FCR 187 (at 195):
‘What is needed to justify an extension of time is indicated in r 15(2) by the words "for special reasons". It is that there be shown a special reason why the appeal should be permitted to proceed, though filed after the expiry of twenty-one days. In that context, the expression "special reasons" is intended to distinguish the case from the usual course according to which the time is twenty-one days. But it may be so distinguished (not necessarily will, for the rule gives a discretion) wherever the Court sees a ground which does justify departure from the general rule in the particular case. Such a ground is a special reason because it takes the case out of the ordinary. We do not think the use of the expression "for special reasons" implies something narrower than this.’
Although those observations were made in the context of the expression ‘for special reasons’ in the rules of Court, her Honour considered they were of assistance in the interpretation of the expression ‘special circumstances’.
Her Honour then said (at [25] and [26]):
In my view, the Tribunal probably overstated the significance of the requirement in s 1237AAD(b) for "special circumstances". The Full Court in Beadle did not endorse the view expressed by the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3 that circumstances are special only if they are "unusual, uncommon or exceptional".
However, the Tribunal concluded that the applicant’s circumstances "do not differ from those of many income support recipients". In the context in which the Tribunal reached this conclusion, it is to be understood as having made a judgment that neither hardship nor unfairness made it desirable to waive all or part of the applicant’s debt because the applicant’s circumstances were common-place rather than special. While, as French J pointed out in Hales, the evident purpose of s 1237AAD is to enable a flexible response to the wide range of circumstances which could give rise to hardship or unfairness, the statutory requirement for "special circumstances" discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness to which French J referred must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case.’
Then, at paragraph 33 of his reasons, in referring to what Branson J had said in Ryde, Besanko J said:
“33 I note her Honour’s reference to the Tribunal in the case before her probably overstating the test. I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of 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. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.” (emphasis added)
38. The Tribunal has noted Mr Nguyen’s circumstances mentioned by Mr O’Loughlin and referred to in paragraph 33 above. In relation to Mr O’Loughlin’s oral submission, the Tribunal cannot sensibly accept it. Mr Nguyen had funds and they were available to him, but he simply chose to gamble them away. As to his chronic health problems, in having them Mr Nguyen is in common with other DSP recipients. As was submitted by Ms Bean, the Tribunal is unable to accept that circumstances that attract a DSP in Mr Nguyen’s case are sufficient to make out special circumstances. Finally, in relation to Mr Nguyen’s wife and his family situation, there is nothing unusual or uncommon about these circumstances. Overall, there is nothing in Mr Nguyen’s circumstances that distinguishes his case from the ordinary or usual case. Whilst they may be straitened and stressful, they are not such that they can be categorised as special circumstances. The Tribunal is not satisfied that they would warrant the waiving of the Debt and the Tribunal so finds.
conclusion
39. Given the findings the Tribunal has made above, Mr Nguyen’s receipts from gambling are “income” (and hence “ordinary income”) pursuant to s 8(1) of the Act. However, on the evidence and its finding in paragraph 21 of these reasons, the Tribunal is satisfied that not all the receipts were referable to gambling and that the sum of $32,000 arose from the proceeds from the sale by Mr Nguyen of the 5 motor vehicles referred to in paragraph 11. This reduces the sum of deposits referable to Mr Nguyen’s gambling activities to approximately $279,000. Even with this reduction, Mr Nguyen has been overpaid DSP. As there are no grounds to waive or write-off the Debt arising from the overpayment, the amount (or part of the amount) of the Debt is recoverable by the applicant.
decision
40. For the above reasons, the Tribunal sets aside the decision under review and, in place of that decision, directs that the matter be remitted to the applicant for recalculation of the Debt that is recoverable in accordance with the Tribunal’s findings, having particular regard to the provisions of s 1073(1) of the Act. The Tribunal reserves liberty to the parties, within 10 days of the date of this decision, to apply in relation to the final quantification of the Debt.
I certify that the 40 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne
Signed: .....................................................................................
AssociateDate of Hearing 28 June 2007
Date of Decision 20 December 2007
Counsel for the Applicant Ms K Bean
Solicitor for the Applicant AGS
Counsel for the Respondent Mr M O'Loughlin
Solicitor for the Respondent Graeme D Hemsley, Barristers & Solicitors
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