O'Riley and Secretary, Department of Family, Community Services and Indigenous Affairs
[2006] AATA 585
•3 July 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 585
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2006/53
GENERAL ADMINISTRATIVE DIVISION ) Re JOHN 0'RILEY Applicant
And
SECRETARY, DEPARTMENT OF FAMILY, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal REAR ADMIRAL A R HORTON AO, Member Date3 July 2006
PlaceSydney
Decision The decision under review is varied in that recalculation of income and expenditure for the relevant period is to be undertaken against the new evidence provided to the Tribunal. In all other respects the Tribunal affirms the decision under review. ..............................................
Rear Admiral A R Horton AO, Member
CATCHWORDS
SOCIAL SECURITY - age pension – assessment of yearly income – Centrelink not notified of business income – complex assessment – debt for overpayment of age pension raised – admission of revised profit and loss assessments – requirement to reconsider debt calculations – the decision under review is varied.
Social Security Act 1991 – sections 55, 1064, 1072, 1075, 1223(1), 1236, 1236(1A), 1237, 1237A, 1237AAD
Social Security (Administration) Act 1999 – section 237(1)
Acts Interpretation Act 1901 - sections 28A, 29
Evidence Act 1995 - section 163
Beadle v Director General of Social Security (and others) (1985) 7 ALD 670
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Dranichnikov & Ors v Centrelink & Ors (2003) 75 ALD 134
Re Ivovic and Director General of Social Security (1981) 3 ALN 95
Re Secretary, Department of Family and Community Services and Jonauskas (2001) 65 ALD 553
REASONS FOR DECISION
3 July 2006 REAR ADMIRAL A R HORTON AO, Member 1. This is an application by Mr John O’Riley (“the Applicant”) for review of a decision of the Social Security Appeals Tribunal (“the SSAT”) made on 16 November 2005. The SSAT set aside a decision of a Centrelink delegate of 29 September 2004, as affirmed by an Authorised Review Officer (“ARO”) on 22 July 2005, to raise and recover a debt of $1,304.47 in respect of overpayment of age pension. The SSAT made a decision that the debt was to be recalculated to take account of a period when Mr O’Riley was not earning income, the resultant debt to be recovered.
2. At the hearing, Mr O’Riley represented himself. Mr G Richardson, a Centrelink advocate, represented the Secretary, Department of Families, Community Services and Indigenous Affairs (“the Respondent”).
3. I had before me the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act1975, (T1 – T39) as well as revised profit and loss balance sheets tabled by Mr O’Riley (Exhibit A1) and the Respondents Statement of Facts and Contentions (Exhibit R1).
BACKGROUND
4. Mr O’Riley was born on 29 July 1933, and became eligible for the age pension on reaching the age of 65 on 29 July 1998. Prior to that he had been working in the building industry. Advice as to the granting of age pension was forwarded to him by letter dated 28 August 1998 (T4), this letter notifying him that his pension rate took account of a yearly income of $544.80 from financial investments. Amongst other detailed criteria, the letter required that Mr O’Riley advise Centrelink within 14 days if the income was incorrect, if he started work or recommenced work, or if he started any form of profession, trade, business or self employment.
5. In May 2004, Centrelink received an anonymous allegation that Mr O’Riley was working for the Leader Newspaper. In response to a request by Centrelink for information, Fairfax Community Newspapers advised that Mr O’Riley was a sub-contractor to that firm as an Area Supervisor (T8 and T9) covering a large area of Arncliffe, Bardwell Park and Bexley, that he was paid for supervising the delivery of the St George and Sutherland Shire Leader (and inserts) in that area, that he was paid twice weekly into two separate bank and credit union accounts, and no tax was deducted at source, that being his responsibility.
6. On 19 May 2004, Centrelink requested advice from Mr O’Riley as to his employment details and income, and in the absence of a reply, age pension was suspended, to be restored some weeks later after interview. T5 provides a Centrelink record of subsequent discussions and correspondence with Mr O’Riley, in order to obtain the necessary income and expense details so that the correct income basis for the age pension could be ascertained. Again, in the apparent absence of adequate response from Mr O’Riley, age pension was further suspended (and then restored) on a number of occasions.
7. On 29 September 2004, Ms Rebecca Whyte, a Complex Assessment Officer (“CAO”) at the Hurstville Centrelink office compiled a report (T20) in respect of Mr O’Rileys assessed income, observing that he has no tax returns to assist with calculating business expenses. Her report notes that his business was registered in June 2000. Calculation of profit and loss was undertaken for the financial year 2003/2004 on the data provided by Mr O’Riley, who advised, as recorded by Ms Whyte, that profit and loss income and expenses would have been the same since 2000. Resulting from that report, a debt of $1304.47 for the period 1 July 2000 to 2 August 2004 was raised for recovery.
8. In response to a letter from Fairfax Community Newspapers confirming that, as claimed by Mr O’Riley, he had not worked for that organisation from 17 June 2003 to 21 October 2003 and hence had no income from that source, the SSAT set aside the decision and referred the matter back to Centrelink for recalculation, directing that the resultant debt should be recovered. Debt recalculation by Centrelink now indicates a debt of $2,154.36, but the accuracy of this re-calculation has yet to be verified for the reasons that will become apparent in this decision. Suffice that the age pension rate of Mr O’Riley was subsequently adjusted to allow periodic recovery of the debt.
LEGISLATION
9. Section 1072 of the Act defines income and in accordance with section 55, age pension rate is calculated using Pension rate Calculator A at section 1064. In the case of Mr O’Riley, the Respondent accepts that his pension is determined under the income test.
10.Section 1223 gives the authority for the recovery of a debt thus:
”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.”
11. Section 1236 refers to the writing off of a debt, but none of the criteria, that is no capacity to repay, or the person cannot be located or it is not cost effective to recover the debt, apply in the case of Mr O’Riley. Legislation in respect of the waiver of a debt relevantly states:
“SECT 1237A
Waiver of debt arising from error
Administrative error1237A(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.
Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
SECT 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.”
EVIDENCE
12. Note has been made of the difficulty that Centrelink encountered in obtaining adequate and accurate information from Mr O’Riley as to his income and expenses, in order that his net income could be calculated over the period under review. That there were no income tax returns upon which to base such calculations hindered the process, particularly in respect of legitimate business expenses. The same difficulties arose in the hearing before me, Mr O’Riley varying his responses quite frequently and being reluctant to directly and consistently provide answers to questions put to him by both the Respondent and myself.
13. Variously, Mr O’Riley argued that the activities from which he derived an income were by way of a hobby. He reluctantly accepted the Respondent’s position that he was operating a business – and I observe he is registered as a business – and would need to be such in order to claim business expenses. As to the lack of tax returns – which is not a matter to be considered before me – he considered that he did not need to do so, and that he had an Australian Taxation Office written authority. No such authority was presented at the hearing. Suffice that the matter of which items of business could be claimed as deductions, and at what rate, would have been simplified. This difficulty was amply demonstrated in that Mr O’Riley argued that he was, by law, able to earn a net income of up to $122 per fortnight which would keep him under the threshold for retention of the full age pension. He insisted that the deductions he believed he was entitled to would be such that his gross income – about $350 per fortnight as calculated by me on the payment summaries provided by Fairfax for a six month period in 2004 – were always below that threshold.
14. Mr O’Riley lives alone in his own home. As to his health, he stated he could not walk long distances. He described his role as an Area Supervisor as “employing” about 20 people (“rounders”) to deliver the papers and inserts in his area, they being paid directly by Fairfax and receiving their papers direct from that company on two days a week. He had to ensure that deliveries were being undertaken correctly in what was really a four day period. He used his motor vehicle (with a trailer as necessary) to carry out random checks, to deliver rubber and plastic bands to the rounders, to reposition papers and to collect and hold any oversupply for later collection by Fairfax. For that he used part of this home and carport to provide storage. He gave evidence that he had a lot of hand written paperwork in support of his duties, and incurred significant telephone and fax costs.
15. With the exception of the 25% business use figure used by the CAO in respect of his home and carport, and the failure to recognise additional electricity costs because of the lighting required in his carport for his business activities, Mr O’Riley was generally satisfied with the percentages allocated for business use. He submitted that he used the second of the two bedrooms in his home as an office and store, and half of the carport was given to the same purpose including housing the trailer he required for his business activities.
16. At issue was the inability of the CAO to make provision for the depreciation of his motor vehicle, apparently in the absence of any reasonable and recognised criteria. Mr O’Riley stated that accordingly he went to the ATO and obtained the formula used by that authority. The Respondent acknowledged that depreciation should be taken into account when calculating business expenses and agreed that Centrelink would further review the matter of depreciation.
17. T17 is a profit and loss statement, the first page reflecting the instructions for the use of the form, the second showing non variable and variable expenses for 2003/2004 with a further column being used to define the expenses, against the relevant percentages, that could be assigned against business income. The third page is signed by Mr O’Riley and dated 29 September 2004. Whilst Mr O’Riley confirmed that he had assisted the CAO to prepare such a document, he was adamant that the page 2 before me was not that prepared, but that it reflected changes by Centrelink. He further believed that this document had been overwritten, that is, the original figures changed, based on a comment by Mr B Cole, an ARO, as recorded in a file note of 19 September 2005. This led Mr O’Riley to state that in any event, he considered it inappropriate to use his previous expenditure figures for 2003/2004, (which he now believed to be in error anyway), as being representative of expenditure in the earlier years. He had prepared a further set of income and expenditure figures for each year, and these were accepted into evidence as Exhibit A1.
18. Here it is appropriate to note that in lodging his application for review of the decision by the SSAT, which he did on 18 January 2006 (T1), Mr O’Riley had provided a different set of profit and loss calculations as well as other material he considered relevant. In the light of acceptance of his latest calculations at Exhibit A1, those figures of 18 January 2006 are no longer relevant. Suffice that Mr O’Riley sought to have his latest assessments taken into account by Centrelink in having the matter reviewed, and the Respondent confirmed this could be done subject to the decisions of the Tribunal in this matter. As to whether he would have the necessary documentation/evidence to support his assessments, Mr O’Riley stated that he kept a hard copy “of everything”.
19. In response to the Respondent, Mr O’Riley stated that he could not recall receipt of the letter of 28 August 1998 (T4) which advised the granting of the age pension and stated the requirement to inform Centrelink if the income on which the pension rate was based was in error, any change in income, and should he take up employment or start a business. His initial response was that he could not say yes or no as to whether he had received the letter, but he subsequently stated he had not received it and had no record of receipt. He did not respond to a question from Mr Richardson as to whether he knew he had to advise Centrelink of his business activity. Mr Richardson stated that to the best of his knowledge this was the only letter sent to Mr O’Riley in the period under review that would have contained such information.
20. In respect of the period earlier referred to where he was not working after a hip operation, Mr O’Riley emphasised the point that where he had no income, many of the expenses continued. By way of final submission, he stated that he had done nothing wrong, and hence there should be no debt for overpayment. As he stated numerous times in the course of the hearing, his dealings with Centrelink had often been quite unhelpful, particularly in respect of dealing with different offices which had various responsibilities within the Centrelink organisation.
21. I advised Mr O’Riley that should I find that a debt existed, I would be considering whether any amelioration under the provisions of the Act might apply. Hence I sought his response as to any personal issue or circumstances that should be considered. He was reticent, but referred to an outstanding $10,000 to $12,000 debt in respect of hospital accommodation bills incurred in 2003 which Medicare would not accept, and a debt of some $30,000 which has arisen from solicitors costs, these in turn resulting in part from a dispute with a neighbour but primarily from a dispute with a previous friend with whom he owns his home on a tenants in common basis. He thinks it likely they will be forced to sell the property to settle the matter. He also stated that his age pension had been stopped some three months ago for no evident reason; Mr Richardson undertook to ascertain the situation.
22. In final submissions, Mr Richardson confirmed that the Respondent considered Mr O’Riley to be conducting a business, the activities of which had been reasonably consistent since starting the business in 1999, this being supported by the weekly payment summaries provided by Fairfax. The Respondent had not been aware that Mr O’Riley had been operating this business, and hence earning an income, until the anonymous allegation. Mr Richardson submitted that whilst the income and expenditure figures used by the CAO in September 2004, were now being questioned by Mr O’Riley, they reflected his involvement at that time with the CAO in the calculation of net income. As he had earlier agreed, Centrelink would reconsider the matter of motor vehicle deprecation using the ATO policy.
23. As to whether the debt or part thereof should be waived, Mr Richardson submitted that there had been no administrative error by Centrelink, the debt having arisen by the failure of Mr O’Riley to advise his business details and income, and hence the debt could not be waived under the provisions of section 1237A. The Respondent further opined that a waiver under section 1237AAD was inappropriate in that special circumstances were not evident. Insufficient evidence had been given by Mr O’Riley to indicate he was in financial difficulty, the debt could be and indeed was, being paid off by fortnightly reductions to his age pension rate, he owned his home (albeit on a tenants in common basis), and he had given no evidence to indicate health problems.
24. Mr Richardson submitted that the Tribunal should affirm the decision of the SSAT. He further sought a direction however, that Centrelink re-assess the extent or otherwise of a debt, taking into account the revised details of income and expenditure as tendered in evidence by Mr O’Riley at Exhibit A1. It would be a matter for Mr O’Riley to substantiate those revised figures.
CONSIDERATION OF ISSUES
25. As earlier stated, the Respondent agreed in the course of the hearing that Centrelink would be prepared to review the calculation of debt against the revised income and expenditure figures put forward by Mr O’Riley. I agreed with this approach. In doing so, I particularly cautioned Mr O’Riley that such a process may not resolve the matter of a debt to his satisfaction, as it could result in the debt being confirmed or even increased. Further, he needed to be aware that he must be able to substantiate, as necessary, his revised figures. Mr O’Riley specifically acknowledged acceptance of the process and the possible outcomes.
26. As to the percentages of expenditure in the variable and non-variable categories used by the Centrelink CAO to assess business related expenses, with two exceptions they seem reasonable in the circumstances, and are generally agreed by Mr O’Riley. It may be appropriate that the 25% work-related expense applied to his home including the carport be reviewed in the light of his concerns. More specifically, a calculation of depreciation of his motor vehicle needs to be applied in a further CAO assessment, probably using a validated ATO policy and procedure.
27. The evidence is quite clear that from 1 July 2000 until mid 2004, Mr O’Riley did not advise Centrelink that he was conducting an income producing business, nor did he declare any earnings from that business. He has argued that he did not receive the letter of notification and by inference, although he did not specifically respond to the questions put to him, was therefore not aware of the requirement to advise Centrelink. His alternate position, as noted above in paragraph 13, is that he knew his net income was below the threshold wherein his age pension could be affected, and hence he had no reason to advise Centrelink.
28. The legislation is quite clear, and case law has affirmed, that delivery of a letter can be assumed if the location and address of the recipient is known. Section 237(1) of the Social Security (Administration) Act 1999 relevantly states:
“(1) If notice of a decision under the social security law is :
…
(c) sent by prepaid post to the postal address of the person last known to the Secretary,
notice of the decision is taken, for the purposes of the social security law, to have been given to the person.”
and this is supported by the legislation in the Acts Interpretation Act 1901 at sections 28A and 29 and the Evidence Act 1995 at section 163. The letter of 28 August 1998 conveyed a decision in respect of eligibility for, and rate of payment of, age pension, and in doing so, the requirement for reporting certain occasions to Centrelink, including whether the income basis for calculations was incorrect, or the person started a business.
29. The view of Mr O’Riley that he knew at all times that his net income was below the threshold – which he referred to as $122 per fortnight - for reduction of age pension and that he therefore had no requirement to advise Centrelink, deserves further comment. As noted above, his gross income from the business averaged about $350 per fortnight in the first six months of 2004, and Mr O’Riley conceded that income in other periods, with the exception of the months he was unable to work after his hip operation, would have been similar. He could not accept that as he had not lodged any taxation returns (or advice as to his income to Centrelink), he had no evidence as to what expenses would be accepted as deductions, nor at what percentage rate. That is, he was not in a position to know whether or not his net debt – as acceptable to the relevant authority - would be under the threshold that he was applying.
30. My conclusion after consideration of all the evidence before me, is that any overpayment to Mr O’Riley of his age pension is a debt that must be paid to the Commonwealth pursuant to subsection 1223(1) of the Act. The amount of any debt will be determined by Centrelink after review of the revised income and expenditure figures tabled at Exhibit A1. It remains to consider whether the circumstances are such that such debt could be written off (observing that it could be recovered at a later date) or waived in whole or in part.
31. Section 1236 of the Act applies to the circumstances where a debt can be written off. It is not applicable to Mr O’Riley, in that he has the capacity to pay, he is in receipt of a social security benefit and it is cost effective to take recovery action. Nor is section 1237A applicable as any debt or a proportion thereof was not caused by action of Centrelink alone; indeed any debt is wholly attributable to the failure of Mr O’Riley to inform Centrelink of income from his business.
32. Section 1237AAD refers to “special circumstances”. It states:
“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.”
33. Mr O’Riley did not make a false statement, but it might be argued that he made a false “representation” in that he did not advise Centrelink of his business or the income he so derived. That would be a harsh interpretation. Again, whether he knowingly omitted to comply with a provision of the Act, is a moot point, and I make no decision in that regard.
34. The Respondent drew on a number of authorities in respect of special circumstances. The term is not defined in legislation, but the interpretation put forward by the tribunal with Toohey J presiding in Re Beadle and Director General of Social Security (1984) 6 ALD 1, has been widely followed, and states:
"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."
35. That tribunal went on to say (at 3) that "the existence of special circumstances is to be determined from all the circumstances ..." which in the context of the matter before that tribunal related to an application for handicapped child’s allowance. That "all the circumstances" should be considered in this matter is supported by the words of the Full Federal Court in dismissing an appeal against the above decision (Beadle v Director-General of Social Security (and others) (1985) 7 ALD 670), wherein it was stated at 674 in respect of whether special circumstances were evident in the delay in making a claim "More difficult would be questions of ignorance, illiteracy, isolation, illness and the like. It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it possible to lay down precise limits or precise rules". Such a view has been subsequently endorsed by the Full Federal Court in Dranichnikov & Ors v Centrelink & Ors (2003) 75 ALD 134 at 66 – 67.
36. There are a number of issues that must be considered in order to determine whether the circumstances of Mr O’Riley are unusual, uncommon or exceptional. Following Re Secretary, Department of Family and Community Services and Jonauskas (2001) 65 ALD 553, the onus is on the recipient of a social security payment to meet the obligations defined in periodic letters or advice from Centrelink. Mr O’Riley was in receipt of correspondence dated 28 August 1998 which required him to take note of his obligations and inform Centrelink accordingly. Particular clauses required him to notify Centrelink in the event that his income changed or he commenced or re-commenced work or started a business. That he chose not to do.37. Mr O’Riley has demonstrated an ability to maintain reasonable financial independence. He is not in financial straits, and has been making payments against what to date has been calculated as a relatively small debt, through his age pension payments. He has referred to a number of financial difficulties such as paying of a hospital debt and the possibility of having to sell his home. But the details that might support those claims have not been provided. I also take account of the fact that he owns – in conjunction with another person – his home; he could presumably be expected to receive some return from the sale of this property should that eventuate. Further, his evidence was that he was continuing with his business as an Area Supervisor for Fairfax Community Newspapers. No significant health issues were raised other than that he cannot walk too far. There are no medical reports before me.
38. On the evidence before me, there are no special or unusual circumstances, and hence recovery of the debt is not waived.
39. The decision under review is varied in that recalculation of income and expenditure for the relevant period is to be undertaken against the new evidence provided to the Tribunal. In all other respects the Tribunal affirms the decision under review.
I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of REAR ADMIRAL A R HORTON AO
Signed: Associate
Date of Hearing 7 June 2006
Date of Decision 3 July 2006
Representative of the Applicant Mr J O’Riley, Self-Represented
Advocate for the Respondent Mr G Richardson,
Centrelink Legal Services Branch
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