Nieukerke and Secretary, Department of Social Services (Social services second review)
[2018] AATA 2245
•16 July 2018
Nieukerke and Secretary, Department of Social Services (Social services second review) [2018] AATA 2245 (16 July 2018)
Division:GENERAL DIVISION
File Number: 2017/5054
Re:Kaj Nieukerke
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Member C Edwardes
Date:16 July 2018
Place:Perth
The Tribunal affirms the decision of AAT1.
.............[sgd]...........................................................
Member C Edwardes
CATCHWORDS
SOCIAL SECURITY – age pension – overpayment – debt due to the Commonwealth – whether recovery of debt should be written off or waived – debt not attributable solely to error made by Centrelink – no “special circumstances” – AAT1 decision under review affirmed
LEGISLATION
Social Security Act 1991 (Cth) – s 8 – s 8(2) – s 9 – s 43 – s 44(1) – s 55 – s 55(a) –
s 1064 – s 1064(1) – s1076 – s 1076(2) – s 1223(1) – s 1236 – s 1236(1) – s 1236(1A) –
s 1237 – s 1237(A) – s 1237A(1) – s 1237AAD – s 1237AAD(1)Social Security (Administration) Act 1999 (Cth) – s 66A – s 68 – s 68(2)
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9
Beadle v Director-General of Social Security (1985) 60 ALR 225
Beadle v Director-General of Social Security (1985) 7 ALD 670
Beadle and Director-General of Social Security (1984) 1 AAR 362
Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114; (2007) 97 ALD 196 (8 March 2007)
Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Dranichnikov v Centrelink (2003) FCAFC 133 (19 June 2003); (2003) 75 ALD 134
lvovic and Director-General of Social Services (1981) 3 ALN N95; [1981] AATA 57
Locke and Secretary, Department of Social Services [2014] AATA 904
Re Gerhardt and Secretary, Department of Employment, Education and Training [1996] AATA 173
Secretary, Department of Family & Community Services v Sekhon [2003] FCA 76; (2003) 73 ALD 41
Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126; 76 ALD 105
Snodgrass and Secretary, Department of Social Services (Social services second review) [2016] AATA 185Re Timothy Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1; (2007) 94 ALD 693
SECONDARY MATERIALS
Guide to Social Security Law – 4.4.1.10 – 6.7.3.30
REASONS FOR DECISION
Member C Edwardes
16 July 2018
BACKGROUND
On 31 July 2017, the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) handed down a decision that affirmed a decision made by an Authorised Review Officer (ARO). The ARO’s decision was a decision to increase the age pension debt to $21,216.91 owed by the Applicant for overpayments by Centrelink (the Department) during the period 1 August 2014 to 12 May 2016 (the Relevant Period).
The Applicant now seeks a review of the AAT1 decision.
The Applicant told AAT1 that he was not contesting the debt and accepted that it had been correctly calculated (T2 11) (R1).
RELEVANT FACTS AND EVIDENCE
From 25 July 2014 to 12 May 2016 (the Debt Period), the Applicant was in receipt of an age pension.
The Applicant has received an age pension from 5 May 2013 (T42 576) (R1).
The Tribunal notes that the debt arose out of a number of minor variations to the Applicant’s income and assets on the rate of payment.
The documents before the Tribunal show that the debt that has accumulated from 10 April 2015 resulted in the Applicant’s rate of pension being assessed as nil (T2 12, T35 479) (R1).
The documents also show his assets were over the limit for a single home owner (T35 480) (R1).
The Applicant sold his house in Victoria on 23 March 2015 for a price of $972,992 (T6 103) (R1). The nil entitlement arose as a result of the Applicant purchasing a block of land on 10 April 2015, for the purpose of building a house.
The block of land, in excess of two hectares and purchased in Esperance, costs $272,000. The settlement occurred on 10 April 2015. The Applicant built a shed which became his residence and made improvements over a period of 12 months. This cost the applicant approximately $108,000.
The Department assessed that the amount that could be disregarded for the period of 12 months was $249,000 (T35 480) (R1).
The Applicant’s assessable assets (including superannuation funds) were assessed at $1,365,032.00 (T35 479) (R1).
This quantum of assets meant a nil payment in terms of the age pension.
During the Debt Period, there are multiple requests from the Department seeking information from the Applicant and information notices (T25 352-354, T26 373, T29 420 T30 441) (R1).
Each of these notices were sent pursuant to section 68(2) of the Social Security (Administration) Act 1999 (Cth) (the Administration Act), which allows the Secretary to give a notice that requires a person to advise Centrelink of specified events or changes in circumstances.
The Tribunal notes for example, that the letter to the Applicant dated 28 July 2014 states:
What you must tell us
You must tell us within 14 days (28 days if residing outside Australia) if any of the changes listed below happen, or are likely to happen to you and/or your partner (if you have one). If you get a Reporting and Income Statement, report your earnings or changes in circumstances on your reporting day (T26 356) (R1).
It is clear to this Tribunal that notices of this sort are intended to ensure that pension recipients comply with section 66A of the Administration Act, which provides that a person has a general obligation to provide Centrelink with information about any changed financial circumstances that might alter their pension entitlements within 14 days from the date their financial circumstances change.
Section 68 of the Administration Act further provides that the Secretary can require a person in receipt of a benefit to notify Centrelink of a specified event or change in circumstances.
As a result of a number of assessments, the Department on the 23 September 2016 determined for the period 1 August 2014 to 12 May 2016 that the Applicant had an age pension debt of $20,633.96 and informed the Applicant that the “correct amount of your investments from Shares, … [the self-managed super fund] … and gifted money was not taken into account in the payment made to you. This means you have been overpaid $20,633.96” (T30 443) (R1).
The Applicant requested an internal review of the decision (T32 459) (R1). The review was undertaken by the ARO. Additional information was requested by the Department from the Applicant in order to undertake the review.
The ARO’s review determined that the debt that the Applicant incurred for the period 25 July 2014 to 12 May 2016 amounted to an increased amount of $21,216.91 (T34 465) (R1).
On the 28 February 2017, the Department identified in its Debt Report that the Applicant had no entitlement to an age pension between 25 July 2014 to 18 September 2014, and for 17 April 2015 to 12 May 2016 (T34 471-475) (R1).
The ARO found:
·You paid (sic) Age Pension from 13 May 2013 to 16 May 2016.
·You sold your Principal Home at … Elwood Victoria and the final payment from the sale for $972,992.17 was paid to you on 23 March 2015.
·You intended to use some proceeds from the sale of your home to purchase a property and build a residence at your current address of … Pink Lake WA.
·The purchase of the 4 hectare property at Pink Lake was completed on 10 April 2015 for $272,000.000 inclusive of costs.
·In the period from 26 June 2015 to 24 April 2016, you spent a further $108,000.00 purchasing a shed and converting this into your home.
·You loaned your son $200,000.00 from the proceeds of the sale of your home you also used $181,181.00 to purchase a further account in the … [self-managed super fund].
·From 8 April 2015 you had assessable assets 1,365,032.00
·As your assets exceeded the allowable limit you were not entitled to receive Age pension.
·During the period 8 April 2015 to 16 May 2016 you received Age Pension totalling $21,216.91.
·You were entitled to receive $0.00.
·The debt was raised because your assessable assets exceeded the allowable asset limit (T35 479) (R1).
The ARO found that there were no grounds for the debt or part of the debt to be waived or written off.
The Applicant was payed $30,270.86 for the period 25 July 2014 to 12 May 2016. The Applicant was entitled to $9053.95. Therefore, the debt owed by the Applicant is $21,216.91.
On 5 April 2017, the Applicant sought a review by AAT1 (T36 485) (R1).
The Applicant told AAT1:
20Dr Nieukerke told the tribunal that the debt arose solely due to error by the Department and he received the payments in good faith.
21Dr Nieukerke told the tribunal that he had ceased to be eligible for age pension by the time he attended the Esperance Centrelink office on 8 April 2015. At that time he advised that he had sold his home in Victoria and was living in a caravan park in Esperance. He was issued a rent assistance form. Dr Nieukerke said that he subsequently attended the Esperance Centrelink office again on 15 April 2015. At the time he had with him the documents related to the sale of his Victorian property and purchase of the Esperance property. He was not asked to provide the documents. Instead he was told that he was not entitled to rent assistance, and the proceeds of the sale of the sale of the Victorian property would be disregarded for 12 months.
22Dr Nieukerke said that he therefore left the Esperance Centrelink office with the understanding that he remained entitled to age pension. He said when the 12 months was up he returned to the Esperance Centrelink to discuss his assets. Dr Nieukerke expressed his frustration that the Departmental documents have no record of his attendance at the Centrelink office on 15 April 2015 (T2 13) (R1).
On 31 July 2017, AAT1 affirmed the original decision. It found that:
25The tribunal cannot therefore be satisfied that the debt arose solely due to administrative error by the Department. This means that recovery of the debt is not waived.
26Recovery of a debt may be waived where there are special circumstances. For this to occur the tribunal must satisfy itself that the debts did not result wholly or partly from Dr Nieukerke or another person, knowingly making a false statement or false representation, or failing or omitting to comply with the provisions of the social security law and further that there are special circumstances (other than financial hardship alone) that make it desirable to waive the debt. In addition the tribunal must be satisfied that it is more appropriate to waive than to write off all or part of the debt (section 1237AAD of the Act).
27The term ‘special circumstances’ is not defined in the Act. The tribunal had regard to relevant decisions where the term has been considered. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, the Federal Court considered the test for determining whether there are ‘special circumstances’ in a particular case. The Court said:
[33]...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.
28Dr Nieukerke argued that the Department’s error should constitute special circumstances. He did not put forward any other circumstances that were out of the ordinary. The tribunal does not find that Dr Nieukerke’s circumstances are such that it is desirable to waive recovery of the debt.
29Recovery of a debt may be written-off for a period if, and only if:
•the debt is irrecoverable at law; or
•the debtor has no capacity to repay the debt; or
•the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
•it is not cost effective for the Commonwealth to take action to recover the debt (section 1236 of the Act).
30If a debt is recoverable by means of deductions from the person’s social security or family assistance payments the person is taken to have a capacity to repay the debt unless recovery by those means would result in their being in severe financial hardship (subsection 1236(1 C) of the Act).
31Dr Nieukerke told the tribunal that he is currently repaying the debt using his Netherland’s pension. He said that it is likely that the debt will be repaid in four years. He acknowledged that he has a significant level of assets. The tribunal finds that Dr Nieukerke has the capacity to repay the debt. This means that write off is not appropriate (T2 13-14) (R1).
On the 24 August 2017, the Applicant applied to the General Division of the Administrative Appeals Tribunal (the Tribunal) for a second review of the decision for the following reasons:
For the enclosed papers and appendix ‘A’ – ‘G’ I deem these documents to be my supportive evidence and log of events pertaining to your Tribunal’s decision. I believe there is sufficient documentation to warrant a further review and another hearing please (T1 2) (R1).
The Tribunal has jurisdiction to hear this matter pursuant to section 179 of the Administration Act.
ISSUES
The issues for consideration by this Tribunal are:
·whether the Applicant has been overpaid age pension during the relevant period;
·if so, whether this overpayment is a debt owed to the Commonwealth; and
·if so, whether recovery of all or part of the debt should be written off or waived.
In relation to issue 3 above, in making this determination, the Tribunal must examine:
(a)whether the debt can be written off because of a number of circumstances listed in subsection 1236(1A) of the Social Security Act 1991 (Cth) (the Act);
(b)whether the debt can be waived because the debt arose “solely” as a result of an administrative error on the part of the Commonwealth pursuant to section 1237A of the Act; and
(c)if not, whether the debt can be waived because of “special circumstances” as per section 1237AAD of the Act (noting that this can only occur if there is evidence that the person seeking to have the debt waived did not ‘knowingly’ make a false statement or misrepresentation relevant to the debt in question, pursuant to section 1237AAD(a)(i) of the Act).
LEGISLATION
The relevant legislation in this matter is the Act and the Administration Act.
The Tribunal is also assisted by the Guide to Social Security Law (the Guide). The Guide provides assistance to those who administer the Act. Whilst not bound to apply policy guidelines, the Tribunal will usually do so unless there are cogent reasons in a particular case not to do so (Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634).
Qualification for age pension
The legislation concerning age pension is in the Act and Part 2.2 of the Act contains the provisions relating to whether a person is qualified for age pension.
Section 43 of the Act sets out the basic qualification for the payment as follows:
Qualification for age pension
43A person is qualified for an age pension if the person has reached pension age and any of the following applies:
(a)the person has 10 years qualifying Australian residence;
(b)the person has a qualifying residence exemption for an age pension;
(c)the person was receiving a widow B pension, a widow allowance, a mature age allowance or a partner allowance, immediately before reaching that age;
(d)if the person reached pension age before 20 March 1997 – the person was receiving a widow B pension, a widow allowance or a partner allowance, immediately before 20 March 1997.
Calculation of rate of age pension
Section 55 of the Act provides that the rate of age pension is calculated using Pension Rate Calculator A at the end of section 1064 of the Act. Subsection 1064(1) of the Act relevantly provides:
1The rate of:
(a)age pension;
…
is, subject to subsection (2), to be calculated in accordance with the Rate Calculator at the end of this section.
Note 1: Module A of the Rate Calculator establishes the overall rate calculation process and the remaining Modules provide for the calculation of the component amounts used in the overall rate calculation.
This process of calculating the overall rate of age pension was outlined by Deputy President Professor Deutsch in the case of Snodgrass and Secretary, Department of Social Services (Social services second review) [2016] AATA 185 as follows:
29Steps 5 and 8 of the Module A method statement require a calculation to be made of ‘the income reduction’ calculated under Module E and for that amount to be taken away from the maximum pension amount. The net figure is the income reduced rate.
30Steps 9 and 10 of the Module A method statement require a calculation to be made of ‘the reduction for assets’ calculated under Module G and for that amount to be taken away from the maximum pension amount. The net figure is the assets reduced rate.
31Step 11 of the Module A method statement requires a comparison to be made between the income and the assets reduced rates and the lower of the two rates becomes the rate of pension (after some other adjustments are made at step 12 none of which are relevant for present purposes).
(Emphasis added.)
Section 8 of the Act relevantly defines “income” as “an income amount earned, derived or received by the person for the person’s own use or benefit”. This definition includes income earned, derived or received by any means and from any source whether within or outside Australia: section 8(2) of the Act.
Section 9 of the Act defines a ‘financial asset’ as including “a financial investment”. The same section also provides a definition of “financial investments” which includes, inter alia, deposit money.
Section 1076 of the Act provides for deemed income from financial assets as it relates to persons other than members of couples. Section 1076(2) of the Act provides:
2A person who has financial assets is taken, for the purposes of this Act, to receive ordinary income on those assets in accordance with this section.
The rate of income that a person is deemed to have received from those investments is a fixed amount, regardless of the amount of income the financial assets are actually earning.
The Guide, at part 4.4.1.10, provides historical deeming rates and applicable thresholds operating since 1 July 1996. The threshold amounts applicable to the Debt Period range from $41,000 in early 2009 to $48,600 in 2015. The current deeming rates are 1.75% for the first $48,600 and 3.25% for balances above this rate.
Change in circumstances
Section 68(2) of the Administration Act relevantly provides:
2The Secretary may give a person to whom this subsection applies a notice that requires the person to do any or all of the following:
(a)inform the Department if:
(i) a specified event or change of circumstances occurs; or
(ii) the person becomes aware that a specified event or change of circumstances is likely to occur;
…
Overpayment
Relevant to the overpayment of a social security payment, subsection 1223(1) of the Act provides:
… 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.
Write off or waive recovery of debt
Subsection 1236(1A) of the Act sets out the circumstances in which a debt may be written off:
(a)if the debt is irrecoverable at law; or
(b)if the debtor has no capacity to repay the debt; or
(c)if the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d)if it is not cost effective for the Commonwealth to take action to recover the debt.
Section 1237 of the Act outlines the Secretary’s power to waive the Commonwealth’s right to recover debt:
1On behalf of the Commonwealth, the Secretary may waive the Commonwealth’s right to recover the whole or a part of a debt from a debtor only in the circumstances described in section 1237A, 1237AA, 1237AAA, 1237AAB, 1237AAC or 1237AAD and, if the debt is an assurance of support debt, subject to section 1237AAE.
When waiver takes effect
2A waiver takes effect:
(a)on the day specified in the waiver (whether that day is before, after or on the day on which the decision to waive is made); or
(b)if the waiver does not specify when it takes effect—on the day on which the decision to waive is made.
Further, section 1237A of the Act provides that 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”.
The note to subsection 1237A(1) in the Act states that subsection 1237A(1) “does not allow waiver of a part of a debt that was caused partly by an administrative error and partly by one or more other factors (such as error by the debtor)”.
Section 1237AAD of the Act provides that:
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, the Administration 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.
The Act does not define what is meant by the term “special circumstances”, however, a considerable body of case law exists to assist the Tribunal in relation to this issue. In Angelakos and Secretary Department of Employment and Workplace Relations (2007) 100 ALD 9, the Federal Court stated at [33]:
... 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.
In Davy and Secretary Department of Employment and Workplace Relations (2007) 94 ALD 693, Deputy President Forgie stated in part at [80]:
... ‘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 SS Act [the 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 ...
EVIDENCE
The matter was heard in Perth on 28 June 2018. The Applicant appeared in person and was self-represented. The Secretary was represented by Mr Bishop of Mills Oakley.
The Tribunal accepted into evidence the following exhibits:
·Exhibit A1 – Applicant’s submissions dated 6 March 2018 in reply to the Respondent’s Statement of Issues, Facts and Contentions.
·Exhibit A2 – Bundle of submissions received on 31 November 2017. The bundle includes: Freedom of Information requests, diary entries, and emails.
·Exhibit A3 – Urban Conveyancing Report – settlement statement and NetBank Saver statement as at 1 November 2017.
·Exhibit A4 – Freedom of Information Documents.
·Exhibit R1 – The T-documents (T1-T45 pp 1-2577).
·Exhibit R2 – Statement of Issues, Facts and Contentions dated 15 January 2018.
The Tribunal has reviewed all of the evidence before it and notes relevantly as follows.
The Secretary contends that:
(a)the Applicant failed to notify the Department of changes to his income and assets during the period 25 July 2014 and 12 May 2016;
(b)because the Applicant’s rate of age pension was calculated and paid with reference to incorrect amounts of income and assets, the Applicant was overpaid age pension;
(c)the amount of the overpayment was $21,216.91 for the period 25 July 2014 to 12 May 2016;
(d)the overpayment amount of $21,216.91 is a debt due to the Commonwealth;
(e)there are no grounds for recovery of all or part of the debt to be waived or written off (R2 22).
The Applicant contends:
I am disappointed by the Statement of Facts, Issues and Contentions produced by the Department. It puts in legal terms what is contained in the T-Document. This could and should have been done before the first hearing at the AAT.
It ignores the crux of the matter (A1 1).
CONSIDERATION
Has the Applicant been overpaid the age pension?
Subsection 44(1) of the Act provides that an age pension is not payable to a person if the person’s age pension rate would be nil.
Subsection 55(a) of the Act provides that a person’s rate of age pension is calculated by applying “Pension Rate Calculator A” at the end of section 1064 of the Act.
The ARO stated:
I first looked at whether you have been overpaid. To remain entitled to receive Age Pension a person’s assessable assets must be below the allowable asset limit.
When a person sells their principal home some or all of the proceeds from the sale can be exempt under the asset test for up to 12 months. The exemption applies only to the part of the proceeds to be used to purchase or build a new principal residence.
You sold your home at … Elwood Victoria you (sic) received the initial deposit of $81,496.00 on 25 February 2015 and the balance of $972,992.17 was paid to you on 23 March 2015. You then purchased a 4 hectare property at Pink Lake for $262,000.00 were (sic) you were to build your new principal home. As only 2 hectares are considered allowable curtilage $131.000.00 of the Pink Lake was an assessable asset. You then spent a further $108,000.00 to purchase a shed that was converted into your principal residence. You only spent $380.000.00 of the proceeds from the sale of the home at Elwood and $131,000.00 of this amount was an assessable asset as it was excess curtilage. Therefore only $249,000.00 from the sale were (sic) considered under the asset exemption rules.
When the asset exemption is applied at (sic) person is stiff considered a home owner. The asset limit for a single home owner as at 8 April 2015 was $775.500.00. The limit increased to $783.500.00 from 20 September 2015.
As your total assets as at 8 April 2015 was more that the allowable limit you ceased to qualify for Age Pension from that date.
From 25 July 2014 to 12 May 2016 you were paid a total of $30,270.86. Based on your actual circumstances, I have worked out that you should have been paid $9,053.95. This means you have a debt of $21,216.91 (T35 480) (R1).
In relation to this issue, the AAT1 decision explains as follows:
15The Department determined that the amount that could be disregarded for the 12 month period was $249,000 and Dr Nieukerke has not disputed that amount. This means that Dr Nieukerke’s assessable assets (including superannuation funds) were $1,365,032.00 as at 10 April 2015. The level of assets resulted in a nil payment amount (T2 12) (R1).
In this case, the evidence from AAT1 indicates that the Applicant accepts that he was not contesting the debt and that it was calculated correctly. The Tribunal notes however that the Applicant disagreed that he should be required to repay the debt.
The Secretary contends:
102It is not in dispute that the Applicant was paid age pension in the amount of $30,270.86 for the period 25 July 2014 to 12 May 2016 [T34/465].
103The Department calculated the Applicant’s entitlement for the period 25 July 2014 to 12 May 2016, taking into account his updated income and assets information, and determined that the Applicant was entitled to receive $8,876.99, and therefore the Applicant had been overpaid by $21,393.87. An amount of $176.96 had already been recovered by the Department, in relation to debt number for the period 30 September 2014 to 30 October 2014, which was during the debt period that relates to the present matter. As such, the balance of the overpayment over the period 25 July 2014 to 12 May 2016 was $21,216.91 [T34/465] (R2 22).
The Tribunal agrees with AAT1 that the Applicant was overpaid the age pension between 1 August 2014 to 12 May 2016. The Tribunal also agrees he was overpaid by the amount of $21,216.91 (T2 11) (R1).
There is no contrary argument by the Applicant in respect to incurring the debt or the rate of calculation that occurred.
Is the overpayment of $21,216.91 a debt owed to the Commonwealth?
Section 1223(1) of the Act provides that if a social security payment is made and the person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit, then the amount of the payment is a debt due to the Commonwealth by the person and the debt arises when the person obtains the benefit of the payment.
The overpayment of age pension to the Applicant for the relevant period of $21,216.91 is a debt due to the Commonwealth pursuant to section 1223(1) of the Act.
Can all or part of the debt be waived or written off?
Writing off the debt
Section 1236(1) of the Act provides that the Secretary (and, in his shoes, the Tribunal) may write off a debt due to the Commonwealth subject to section 1236(1A) of the Act 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.
Section 1236(1A)(a), (c) and (d) of the Act do not apply in this case because the Applicant’s debt is recoverable at law and his whereabouts are known.
In relation to section 1236(1A)(b) of the Act, the evidence shows that the Applicant is currently re-paying the debt in question at an amount of approximately $170 per fortnight since 24 October 2016 and that he currently has the capacity to do so (T38 504) (R1) (R2 23).
There is no evidence before the Tribunal at this stage to indicate that, as per section 1236(1A)(b) of the Act that the Applicant is unable to re-pay the debt in question.
Accordingly, this is not a situation whereby the $21,216.91 debt can be waived pursuant to section 1236(1A) of the Act.
Waiver of the Debt
Can the debt be waived because of an administrative error on the part of the Commonwealth?
Section 1237A(1) of the Act provides that:
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. (Emphasis added.)
The note to section 1237A(1) in the Act states that subsection 1237A(1) “does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor)”.
In relation to the meaning of the word “solely” in section 1237A(1) of the Act, the Tribunal notes Re Gerhardt and Secretary, Department of Employment, Education and Training [1996] AATA 173 where Deputy President Forgie states at [40]:
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. If those other errors or factors follow as a result of the Commonwealth’s administrative error (i.e. they are incidental to the Commonwealth’s error), then it may be that the debt is attributable solely to the Commonwealth’s administrative error. Whether it is or is not attributable in that situation to the Commonwealth’s administrative error will be a question of fact.
The Secretary contends:
111Sole administrative error was considered by the Federal Court of Australia in Secretary, Department of Family & Community Services v Sekhon [2003] FCA 76 which stated:
However, it seems to me, the Tribunal failed to consider the significance of the inclusion, in s 1237A(1), of the word ‘solely’. For the subsection to have effect, the ‘proportion’ of the debt – in this case, it is common ground, that would be the whole of it – must be ‘attributable solely’ to administrative error. It is not enough that, in the absence of administrative error, the debt would not have arisen. Administrative error must be the sole cause, not merely one of multiple causes (R2 23).
The Secretary further argues:
…………….. sole administrative error is not available because the Applicant failed to notify the Department of changes to his income and assets during the period 25 July 2014 and 12 May 2016. In support of this contention, the Secretary relies on the following.
The [self-managed superannuation fund] Retirement Fund
113According to schedules dated 2 November 2016 [T23/259-261], the Applicant’s self – managed superannuation fund, … , purchased an account based pension, … on 1 July 2014, which had an account balance as at 30 June 2016 of $34,878.30 and a nominated gross annual income amount of $1,840.00. A further account based pension, product number …, was purchased on 1 July 2015, which had an account balance as at 30 June 2016 was $181,518.54 and a nominated gross annual income amount of $9,550.00.
114However, details of account … and account … were not notified to the Department until the Applicant provided copies of email correspondence from his accountant on 17 May 2016 [T24/312-320]. Full information about these account based pensions was not provided by the Applicant until 3 November [T23/259-261]. As such, the Department’s calculation of the Applicant’s income and assets during the debt period did not take into value of these account based pensions or the annual income the Applicant was receiving from them.
Loan Agreement
115According to a loan agreement dated 21 April 2015 [T7/105], the Applicant entered into a loan agreement whereby he agreed to loan an amount of $200,000 interest free to his son and daughter in-law ...
116According to the Applicant’s bank statement for … Bank account number … for the period 1 January 2015 to 30 June 2015 [T21/218], the Applicant transferred $200,000 into this account on 24 April 2015 with a reference ‘AH loan’, and the same day an amount of $200,000 was debited from this account upon presentation of a cheque. The bank statement was provided to the Department along with other documents on 23 August 2016, as noted in an online document recording [T41/555].
117According to a letter dated 5 May 2016 from the Applicant to the loan recipients [T11/130], the loan was to be repaid by the Applicant gifting $10,000 per year to the loan recipients. The Department stamp on the letter indicates that it was received by the Department on 23 August 2016.
118According to an ‘asset overview’ spreadsheet provided by the Applicant to the Department on 30 January 2017, the Applicant gifted $10,000 on 1 May 2015 and $10,000 on 1 May 2016 to the loan recipients, in repayment of the loan.
119Pursuant to the definitions in section 9, a loan that has not yet been repaid in full is a financial asset. The Secretary contends that the outstanding value of the loan, as affected by the ‘repayments’ made on 1 May 2015 and 1 May 2016, must be taken into account in working out the Applicant’s deemed income in accordance with section 1076 of the Act.
120However, details of the loan were not notified to the Department until the Applicant provided a copy of the loan agreement on 4 August 2016 [T7/105], which was subsequent to the debt period. Further details were not provided until later. As such, the Department’s calculation of the Applicant’s income and assets during the debt period did not take into account the changes that occurred as a result of the Applicant lending the $200,000 on 24 April 2015 or the gifts of $10,000 being made on 1 May 2015 and 1 May 2016.
Proceeds from sale of principal home
121The Applicant sold his former principal home in … Elwood, Victoria, and moved to Esperance, Western Australia, arriving on 1 April 2015 [T1/3].
122According to the online document recording dated 8 April 2015, the Applicant updated his address and accommodation details with the Department on 8 April 2015 [T41/527].
123Between 8 April 2015 and 6 May 2016, the value of the Applicant's former principal home were considered as an exempt asset by the Department.
124The AAT1 reasons for decision indicate that at the hearing before the AAT1 on 31 July 2017 [T2/10-15], the Applicant told the AAT1 that he attended the Esperance Centrelink office on 8 April 2015 and informed Centrelink that he had sold his home in Victoria and was living in a caravan park in Esperance, and that he was issued with a rent assistance form. The Applicant claimed that he attended the Esperance Centrelink office again on 15 April 2015, taking with him the documents related to the sale of his Victorian property and purchase of the Esperance property. The Applicant claimed that when he attended the Department on 15 April 2015, he was not asked to provide his property documents, and was told that he was not entitled to rent assistance, but was entitled to age pension as the proceeds of the sale of the Victorian property would be disregarded for 12 months. The Applicant claimed he left the Departments Esperance office with the understanding that he remained entitled to age pension.
125The AAT1 found that there was no record of the Applicant having any contact with the Department on 15 April 2015. However, there is an Activity Management History Record Archive in relation to the activity on the Applicant’s electronic Departmental file on 15 April 2015 [Annexure A], which indicates that the Applicant’s record was updated on that date, and that the source of the updated information was provided ‘PER’, that is, in person. As such, it appears the Applicant did have contact with the Department on that date.
126However, the Secretary contends that the Applicant did not provide the Department with sufficient information regarding his intended use of the sale proceeds for the application of this exemption to be properly considered by the Department until April-May 2016.
127According to an online document recording dated 13 April 2016, the Applicant informed the Department on that date that he was ‘in the process of building accommodation that he described as a shed, which is situated on 10 acres of land’ [T41/529-531].
128According to an online document dated 19 April 2016, the Applicant advised the Department that the proceeds from the sale of his former principal home were used to fund the purchase of the land in Esperance.
129On 6 May 2016, the Applicant provided documents to the Department, indicating that on 23 March 2015, the Applicant settled the sale of his Elwood home for the net amount of $972,992.17, and on 10 April 2015 he settled the purchase of a 4 hectare block of land at … Pink Lake, Western Australia for $262,000.00 [T51102, T61103-104, T12/131].
130The Applicant provided a spreadsheet to the Department on 30 January 2017 [T33/463], which set out the redistribution of capital after the sale of … Elwood. According to the spreadsheet, the capital was redistributed as follows:
loan A&H
$200,000.00
working capital (building, etc)
$180.000.00
additional personal shares (CDIA)
$180,000.00
SMSF
$180,000.00
vacant land
$262,000.00
$1,002,000.00
131It is not in dispute that the Applicant used some of the former principal home sale proceeds to purchase the Pink Lake property, which was intended to be the Applicant’s new principal home (principally for private and domestic use). However, the Secretary submits that the following relevant information had not been provided to the Department at the relevant time:
(a)Of the total amount of the Elwood sale proceeds, the Applicant used $262,000 to purchase the Pink Lake land, and intended to use $180,000 to build a shed on the property, in which he intended to live. The balance of the sale proceeds were not exempt from the asset test under section 1118(2) of the Act.
(b)The Pink Lake property exceeded the 2 hectare limit provided under section 11A of the Act by 2 hectares. As such, only half of the land value of the Pink Lake property can be considered for the purposes of an asset exemption under section 1118(2) of the Act.
(c)The Applicant used the remainder of the Elwood sale proceeds for other purposes, namely to lend $200,000 to his son and daughter-in-law, to purchase the account based pension (product reference …) in the self-managed super fund, and to purchase additional personal shares. The sale proceeds used for these purposes should have been taken into account in calculating the Applicant’s income and assets in accordance with the relevant provisions.
132The Secretary contends that an amount less than the correct amount of deemed income and assets was taken into consideration when calculating the Applicant’s rate of age pension for the debt period because the Applicant did not provide sufficient information about changes to his circumstances.
133In particular, the majority of the Elwood sale proceeds were not applied to the purchase and improvement of the Pink Lake property, which affected the application of the homeowner exemption.
134The Secretary submits that the Applicant’s failure to advise the Department of his correct income and assets prevents a finding of sole administrative error and therefore the debt cannot be waived on this basis (R2 23-27).
(Original emphasis.)
The Applicant contends:
On 15 April 2015 there was a meeting at the Centrelink office in Esperance. At this meeting I was informed that the sale of my house was exempt for one year. I have provided evidence of the meeting. Some of this comes from my own records, some of this I have extracted from the Department’s records through Freedom of Information.
The Department has neither refuted this information nor produced any data from its own records that does so.
Based on the information before the Tribunal, I can categorically state
1I was advised that the proceeds of the sale of my house in Elwood were exempt for one year.
2That the Department made a calculation of my entitlement to a pension on 15 April 2018. I can only presume it used CoreLogic to extract the data it required. It did not consult or request this directly from me.
3That the Department did not follow proper process, e.g. failed in performing an asset test (which it admits is so complex, it cannot be documented for people who required it). Nor did it seek the assistance of a Financial Information Service officer which could be used.
What followed in the statements issued by the Department was all consistent with item1 above.
Furthermore, when information on my pension fund was forwarded to the Department in Nov 2015 there was no change in my financial status recorded in the Department files. My pension fund had been boosted by $180,000 in April 2015, part of the proceeds from the sale of my property. Once again the Department implicitly confirmed item1 above.
I approach the AAT and seek its concurrence in:
•That the fault was solely the Department’s,
•That I have acted properly and faithfully throughout the whole dealings with the Department,
And
•that accordingly I look forward to the debt being waived ASAP (A1 1-2).
This Tribunal also notes the Guide which provides at 6.7.3.30 as follows:
In general, wherever a mistake has been made in administering a payment, the debt will arise ‘solely to an administrative error’ providing the recipient’s conduct has not contributed to the debt in any way.
·Examples of administrative error include mistakes in:
·Calculating the amount of a payment,
·Determining which social security payment/s a person is entitled to be paid, and
·Correctly actioning information provided by the recipient.
The requirement that part of the debt must have arisen ‘solely’ from administrative error means that there must have been no other factors that caused the debt to arise or contributed to the debt arising. The part of the debt must have arisen as a result of administrative error alone.
In oral evidence before the Tribunal, the Applicant contended that the debt he incurred is the sole responsibility of the Department on the basis of the information he provided to them.
Under cross examination:
·Mr Bishop referred the Applicant to the Centrelink Debt Calculator for the period 24 July 2014 to 12 May 2016 (T34 465) (R1). The Applicant agreed that the debt prior to 2015 occurred as a result of variations in shareholdings as he was not up to date with what he was doing.
Mr Bishop referred the Applicant to correspondence from Centrelink dated 28 July 2014 (T26 356) (R1). The Applicant agreed he understood his obligations. Whilst the Applicant claimed he had advised the Department of changes in his assets within 14 days in July 2014, there is no evidence to suggest this occurred. That is not to say it did not happen as he claimed he received an extension due to tax requirements.
·Mr Bishop referred the Applicant to documents relating to the self-managed super fund (T23 248-250 and T23 254-255) (R1), involving share, superannuation and income streams. The Applicant was not clear if the figures used were correct and he said “he did not go through the detail”.
·He said he could repay the debt.
·His wife passed away in 2012 and his circumstances changed.
·He was by profession a computer specialist, until he became a carer of his wife who was disabled.
·He worked for a cleaner for some time and accumulated a super to the value of $37k.
·He bought a 10 acre property in Esperance, borrowing money initially until he sold his house in Victoria.
·He attended the Centrelink office in Esperance in April 2015 and was asked specific questions.
·He claimed that he provided the Department with all the necessary information.
·He had the asset overview information that he had lodged to the Department of Human Services on 30 January 2017 (T33 463) (R1), but failed to provide that information earlier because he claims he was not asked to.
·The Tribunal asked the Applicant why he did not provide Centrelink with the asset overview information (T33 463) (R1). He said he did not know.
·The Applicant agreed with the Tribunal “I could have done more”.
Having reviewed the evidence before it, this Tribunal is unable to conclude that the debt in question arose solely because of administrative error on the part of the Commonwealth. It is certainly the case that the Applicant did provide Centrelink (on a few occasions) with evidence that showed his income varied.
It is also the case, however, that the Applicant had a clear obligation to provide Centrelink with an update of his income and that he failed to do so. As explained by AAT1:
… and Dr Nieukerke’s statement that he did not actually give any documents to the Department at the time (that is, around 15 April 2015), the tribunal cannot be satisfied that Dr Nieukerke provided the Department with sufficient information for a determination to be made regarding his ongoing eligibility for age pension (T2 3) (R1).
This Tribunal agrees with these findings. It is at least arguable that, had the Applicant fully complied with the reporting requirements imposed on him, the debt for which he now finds himself liable might not have accrued. Without further evidence it is ultimately impossible to determine if this would have been the case. However, it is certainly not the case that, given his failure to comply with the reporting requirements made clear in the notices sent to them, that the debt in question can be blamed solely on an administrative error on the part of the Commonwealth.
In the circumstances, section 1237A of the Act has no application to the facts of this case and the debt in question cannot be waived under section 1237A(1) of the Act.
Can the debt be waived due to “special circumstances”?
Section 1237AAD of the Act provides that the Secretary (and, in his shoes, the Tribunal) may waive the right to recover all or part of a debt if she 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, the Administration 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.
AAT1 did not find that the Applicant knowingly contributed to the debt by making false statements or failing to comply with the provisions of the social security legislation.
The Secretary is not making this assertion, nor is there any evidence before the Tribunal to indicate that this is the case.
The Applicant came across as honest and truthful, however the Tribunal is not in a position to determine why the Applicant did not do more to assist Centrelink. That is not to say that there may well have been advice of an oral nature from Centrelink that allowed the Applicant to think a certain way.
As such, the Tribunal can turn its attention to whether or not “special circumstances” exist (other than financial hardship alone) that makes it desirable to waive the debt.
The Act does not define what is meant by the term “special circumstances” as used in section 1237AAD of the Act. As explained in Exhibit R1, however, there is a considerable body of case law to assist the Tribunal in relation to this issue.
The Secretary outlines the following cases:
137In Beadle and Director-General of Social Security (1984) 1 AAR 362 the AAT held that, in order for special circumstances to exist, it must be possible to say that the circumstances of the case are ‘markedly different from the usual run of cases’ and have ‘a particular quality of unusualness that permits them to be described as special’. In Beadle v Director-General of Social Security (1985) 7 ALD 670, Toohey J stated that ‘the qualifying adjective looks to circumstances that are unusual, uncommon or exceptional’.
138The Full Court of the Federal Court in Beadle v Director-General of Social Security (1985) 60 ALR 1225 (sic) did not endorse the view expressed by the Tribunal in Re Beadle that to constitute special circumstances, they must be ‘unusual, uncommon or exceptional’. Instead, the Full Court held that it was not possible to lay down precise limits or precise rules but it was a matter for the Director-General bearing in mind the purpose for which the power was given (at paragraph 228). However, it was in broad agreement with the approach of the Tribunal and was in agreement with its conclusion (paragraph 230).
139In lvovic and Director-General of Social Services (1981) 3 ALN N95, the Tribunal reported that the decision-maker must ‘... 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 appropriate’.
140In Dranichnikov v Centrelink (2003) FCAFC 133 (19 June 2003), the Full Court, in deciding what circumstances might be special explained that the tribunal needs to identify those ‘circumstances which distinguish one’s case from the usual case’. There will be a requirement that the circumstances are such that takes the applicant’s case out of the ordinary.
141In Angelakos v Secretary, Department of Employment and Workplace Relations (2007) FCA 25, the Federal Court concluded that there must be something that distinguishes the case from the ordinary or usual cases. Justice Besanko said (at paragraph 33):
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. 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.
142In Timothy Davy and Secretary, Department of Employment and Workplace Relations (2007) AATA 1, 114 Deputy President Forgie stated at paragraph 80:
... 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... (R2 27-28).
In evidence before this Tribunal, the Applicant argued that the “special circumstances” provision in section 1237AAD of the Act should apply to him because of the circumstances in which the debt was incurred.
In the hearing before AAT1, the Applicant argued:
….that the Department’s error should constitute special circumstances. He did not put forward any other circumstances that were out of the ordinary. The tribunal does not find that Dr Nieukerke’s circumstances are such that it is desirable to waive recovery of the debt (T2 14) (R1).
AAT1 did not accept that proposition.
The Applicant also told AAT1:
… that he is currently repaying the debt using his Netherland’s pension. He said that it is likely that the debt will be repaid in four years. He acknowledged that he has a significant level of assets. The tribunal finds that Dr Nieukerke has the capacity to repay the debt (T2 14) (R1).
Having reviewed the evidence before it, the Tribunal agrees with these conclusions. There is no evidence before the Tribunal that indicates that the Applicant’s circumstances are out of the ordinary such that they fall within the term “special circumstances”.
In relation to the issue of what might best be referred to as an administrative error on the part of Centrelink, the Tribunal finds given Centrelink’s size and the number of claims it processes, mistakes will inevitably be made. The question this Tribunal is required to ask is whether what happened to the Applicant was sufficiently different from what can and what does occur so as to make their situation fall within “special circumstances”.
The Applicant had a clear obligation to report and provide all the available documentation to Centrelink. While not doubting that the Applicant did what he believed to “be the right thing”, the fact remains that the debt in question is not a debt that is solely attributable to Centrelink. As stated above, it is arguable that had the Applicant complied with all requests for information, the mistake in question may have been caught much sooner.
While not excusing Centrelink’s failure to note the minor changes to the Applicant’s income and assets on the rate of payment, the Tribunal notes that, when taken as a whole, the applicant’s circumstances are not so “unusual, uncommon, exceptional, markedly different, special or out of the ordinary that they represent ‘special circumstances’ as that expression is understood to mean”: Locke and Secretary, Department of Social Services [2014] AATA 904 at [43].
Accordingly, the Applicant’s debt should not be waived under section 1237AAD of the Act.
DECISION
For the reasons outlined above, the Tribunal affirms the decision of the AAT1.
I certify that the preceding 100 (one -hundred) paragraphs are a true copy of the reasons for the decision herein of Member C Edwardes
..................[sgd]......................................................
Administrative Assistant Legal
Dated: 16 July 2018
Date of hearing: 28 June 2018 Applicant: In person Representative for the Respondent: Christopher Bishop Solicitors for the Respondent: Mills Oakley Lawyers
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