PAMELA GROUNDS and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2009] AATA 223

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 223

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/4269

GENERAL ADMINISTRATIVE DIVISION		)
Re		PAMELA GROUNDS

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Deputy President P E Hack SC

Date3 April 2009

PlaceBrisbane (heard in Maryborough)

Decision The Tribunal affirms the decision under review.

.............Signed..................

Deputy President

CATCHWORDS

SOCIAL SECURITY – family tax benefit – adjusted taxable income – assessable income nil - net rental property loss – overpayment of benefit – waiver – no special circumstances – decision under review affirmed

A New Tax System (Family Assistance) Act 1999 (Cth) Schedule 3, clause 2(1)

A New Tax System (Family Assistance)(Administration) Act 1999 (Cth) ss 97, 101

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Secretary, Department of Families, Community Services and Indigenous Affairs and Varela [2006] AATA 640

REASONS FOR DECISION

3 April 2009   Deputy President P E Hack SC    

1.This is an application by Mrs Pamela Grounds in which she seeks to review a decision, made by Centrelink on 4 July 2008, to raise and recover a family tax benefit debt in the amount of $80.30 in respect of the 2006/2007 financial year. It is said by the respondent, the Secretary of the Department Families, Housing, Community Services and Indigenous Affairs that this debt arose from an overpayment of family tax benefit on the basis of estimates of income which were less than Mrs Grounds’ actual adjusted taxable income. The decision was affirmed by the Social Security Appeals Tribunal on 27 August 2008.

2.I need point out, at the outset, that the Tribunal does not possess a general jurisdiction to review decisions made, discretions exercised or not exercised, or general policy decisions made on behalf of the Secretary. The Tribunal’s jurisdiction to review decisions is limited to those decisions where a statute makes provision for such a review. And in undertaking that review the Tribunal is bound (as is the Secretary) to apply the legislation enacted by the Parliament. I am not free to impose idiosyncratic notions of what is fair, I must apply the law to the facts as they are found to be.

3.Thus, whatever view I may have about the utility of proceedings in this Tribunal involving an overpayment of $80.30 I am not at liberty to give effect to that view, I must consider the arguments of the parties and apply the law to the facts as agreed or found, to determine whether the decision under review was the correct or preferable one.

4.I do not understand Mrs Grounds (whose arguments were presented by her husband Mr Grounds) to take issue with the facts as they have been set out in the Secretary’s statement of facts and contentions lodged on 22 January 2009. What follows is taken from that statement.

5.Mrs Grounds received family tax benefit during the 2006/2007 income year. Her entitlement to that benefit was calculated and paid on the basis of Mrs Grounds’ estimated income of $14,154. However it transpired, once her actual income details were available, that Mrs Grounds’ total income for family tax benefit purposes was slightly higher, an amount of $14,558. This consisted of $11,133 in tax exempt pension or benefit monies and $3,425 in net rental property losses.

6.Based on the estimated income, Mrs Grounds was paid $7,393.80 during the 2006/2007 income year but was only entitled to $7,313.50, based on her actual income for family tax benefit purposes; resulting in an overpayment of $80.30. A decision was made to raise and recover that overpayment as a debt. That decision was affirmed on internal and external review. Mrs Grounds does not dispute the income figures that have been used to calculate the debt nor the calculation of the amount of the overpayment.

7.To understand the argument presented by Mrs Grounds it is necessary to briefly examine the legislation in issue. The rate of family tax benefit is determined by reference to “adjusted taxable income”. The method of determining adjusted taxable income is set out in Clause 2(1) of Schedule 3 to the A New Tax System (Family Assistance) Act 1999 (Cth) (the Family Assistance Act) in these terms:

“(1)For the purposes of this Act and subject to subclause (2), an individual’s adjusted taxable income for a particular income year is the sum of the following amounts (income components):

(a)the individual’s taxable income for that year;

(b)the individual’s adjusted fringe benefits total for that year;

(c)the individual’s target foreign income for that year;

(d)the individual’s net rental property loss for that year; and

(e)the individual’s tax free pension or benefit for that year;

less the amount of the individual’s deductible child maintenance expenditure for that year.”

8.Mrs Grounds’ contention is that the literature made available to her by Centrelink was “both incorrect and misleading” and that she ought not be required to repay the overpayment, accepting that the amount in issue is very modest. There was, as Mr Grounds put it, an issue of principle involved for persons like his wife who had no taxable income.

9.These contentions need to find a statutory context given that the amount of an overpayment is a debt due to the Commonwealth[1]. The statute provides limited circumstances where that debt may be waived.

[1]        See A New Tax System (Family Assistance)(Administration) Act 1999 (Cth), s 71(2).

10.The nature of Mrs Grounds’ first assertion raises for consideration the ground of waiver set out in s 97 of the A New Tax System (Family Assistance)(Administration) Act 1999 (Cth) (the Administration Act). That section requires the Secretary (or the Tribunal) to waive a debt attributable solely to an administrative error made by the Commonwealth if the debtor received the payment in good faith and the person would suffer severe financial hardship if the debt were not waived[2]. But that section cannot have application here as Mr Grounds sensibly does not suggest that repayment of $80 would cause severe financial hardship. The requirements of s 97(2) of the Administration Act are cumulative and while I do not doubt that s 97(2)(a) is satisfied s 97(2)(b) is plainly not. Moreover, I have considerable doubt whether the overpayment was solely attributable to administrative error on the part of the Commonwealth. I need not consider that issue.

[2]        See s 97(2) of the Administration Act.

11.Thus s 97 of the Administration Act does not assist Mrs Grounds. 

12.Section 101 of the Administration Act gives the Secretary a discretion to waive the right to recover all or part of a debt if 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;

(ii)failing or omitting to comply with a provision of the family assistance law; and

(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c)it is more appropriate to waive than to write off the debt or part of the debt.”

13.There is no suggestion that Mrs Grounds’ debt arose as a consequence of any knowingly wrong conduct. She made an honest estimate of likely adjusted taxable income which turned out to be slightly inaccurate. Moreover if s 101(b) of the Administration Act is satisfied, there is no doubt that s 101(c) is satisfied. Thus the critical issue is whether there are special circumstances that make it desirable to waive the right to recover the debt.  

14.It is sufficient for present purposes to note of the expression “special circumstances” that they require something that distinguishes the particular case from others, something that sets it apart from the usual or ordinary case[3].

[3]See Groth v Secretary, Department of Social Security (1995) 40 ALD 541, 545.

15.What Mr Grounds says is the point that distinguishes this case from others arises from the practice which the Secretary’s policy manual[4] describes as “adding back” the net rental loss. In the ordinary case net rental property losses have been deducted from other taxable receipts to determine taxable income. But Mr Grounds says, correctly, that where there was no taxable income (Mrs Grounds’ pension being exempt income) no amount has been deducted to be “added back”.

[4]The Guide to Family Assistance Law, para. 3.2.5

16.In the course of the hearing it occurred to me that the present case had some apparent parallels with the decision in Secretary, Department of Families, Community Services and Indigenous Affairs and Varela[5]. Further submissions were invited from the parties. In that case I observed that the evident legislative purpose of the concept of adjusted taxable income “was to determine as precisely as possible what resources – income and benefits – were available to a family.” That purpose is served by “adding back” to taxable income the rental loss, the value of fringe benefits provided by an employer and the other elements of clause 2(1). Mrs Varela, who lived and worked in New Zealand at all material times, paid tax in accordance with that country’s revenue laws. She and her husband acquired a property in Australia that was rented and “negatively geared”. Mrs Varela, who remained entitled to receive family tax benefit, did not include the net rental losses in her estimate of expected income and, as a result, was overpaid family tax benefit.

[5] [2006] AATA 640 at [16].

17.I concluded that there were two features that made her circumstances “special”. First, I accepted, as a matter of fact that Mrs Varela was never made aware by Centrelink of the need to declare rental property losses. But I concluded that the more important consideration was that the operation of the statute in Mrs Varela’s circumstances was truly anomalous and, in my view, unintended.

18.Mrs Grounds, in supplementary submissions, contends that her case is also anomalous. I am unable to agree.

19.First, as the Secretary points out, it is plain that Mrs Grounds, unlike Mrs Varela, was made aware of the need to declare rental property losses. The Secretary’s supplementary submissions attach a series of letters from Centrelink to Mrs Grounds advising of that requirement.

20.But, again, the more important issue to my mind is that the result is neither anomalous nor unintended. If, as I concluded in Varela, the legislative purpose was to ascertain as precisely as possible what resources – income and benefits – were available to a family that purpose is served here by adding the rental losses to the pension. The tax losses demonstrate a source of income, a resource, which was available to Mrs Grounds. Whilst it may be regarded as unusual for someone with no taxable income and income only from tax exempt pensions or benefits to have incurred losses from a negatively geared rental property the consequence that flows seems to me to be the ordinary operation of the statute. I do not regard the circumstances of Mrs Grounds to be “special”.

21.It follows that in my view the present case is not one where the circumstances make it desirable that the Commonwealth’s right to recover the overpayment of $80.30 should be waived. I would then affirm the decision under review. 

I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed:         .......................Signed..............................................
  Melissa Hamblin, Associate

Date of Hearing  3 March 2009
Date of last submissions          17 March 2009 
Date of Decision  3 April 2009
For the Applicant  Mr Grounds

For the Respondent                  Advocate, Centrelink Legal Services