Papps and Secretary, Department of Family and Community Services

[2005] AATA 660

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 660

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No S2005/31

GENERAL ADMINISTRATIVE DIVISION		)
Re		ROBERT BYRNE PAPPS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member L Hastwell

Date8 July 2005

PlaceAdelaide

Decision The Tribunal affirms the decision under review.

(Signed)

L HASTWELL
  (Senior Member)

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances – Family Tax Benefit – arrears of child maintenance led to overpayment in financial year 2003/04 – capitalised maintenance income – grounds for write-off or waiver of debt – special circumstances – decision affirmed

A New Tax System (Family Assistance) Act 1999 ss 3, 58, Schedule 1

A New Tax System (Family Assistance) (Administration) Act 1999 ss 71, 101, 105

Re Doolin and Secretary, Department of Family and Community Services [2004] AATA 164
Re Blunden and Secretary, Department of Family and Community Services [2000] AATA 273

Re Gilbert and Secretary, Department of Family and Community Services [2003] AATA 418

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Re Hunnibell and Secretary, Department of Family and Community Services [2004] AATA 992

REASONS FOR DECISION

8 July 2005   Senior Member L Hastwell

1.      On 14 September 2004 a decision was made by Centrelink that the applicant had received an overpayment of Family Tax Benefit (FTB) of $62.22 as his annual family income for the 2003/04 year was such that he had received more FTB than he was entitled to.  This decision was affirmed by an Authorised Review Officer on 1 December 2004.  The applicant appealed to the Social Security Appeals Tribunal (the SSAT), and on 7 February 2005 the SSAT affirmed the decision under review.  The applicant seeks a review of the decision of the SSAT.

issues

2.      The issues to be determined in this case are:

(a)whether the applicant was overpaid FTB in the financial year ended June 2004, and if so

(b)whether the quantum of the overpayment is correctly assessed and if so,

(c)       whether the overpayment is a recoverable debt, and if so

(d)whether there are grounds in existence to warrant write-off or waiver of the debt because of special circumstances.

legislation

3. Section 105 of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act) provides:

“105(1)          If:

(a)a decision (the original decision) is a decision that, under section 104, the Secretary may review under this section; and

(b)the Secretary is satisfied that there is sufficient reason to review the decision;

the Secretary may review the decision.”

4. Section 3(1) of the A New Tax System (Family Assistance) Act 1999 (the Act) includes a definition of capitalised maintenance income in the following terms:

“capitalised maintenance income, in relation to an individual, means maintenance income of the individual:

(a)that is neither a periodic amount nor a benefit provided on a periodic basis; and

(b)       the amount or value of which exceeds $1,500.”

5. Section 58(1) of the Act provides the method of calculation of the annual rate of FTB. Maintenance income is dealt with in Clause 19A of Schedule 1 to the Act, which provides as follows:

“19AIn this Division, if the FTB child of an individual receives maintenance income, the individual is taken to have received the maintenance income.”

6. Clause 20A of Schedule 1 to the Act provides a formula to calculate the rate of FTB where an individual receives maintenance income in an income year. Clause 20A provides:

“20A(1)  The object of this clause is to annualise the maintenance income (other than capitalised maintenance income) (CMI) of an individual during an income year.

20A(2)  If an individual receives maintenance income (other than CMI) from another individual during any period or periods (the relevant period or periods) in an income year, the annualised amount of the maintenance income of the individual is worked out using the following formula:

The amount of maintenance income                Number of days in the income year
   (other than CMI) received by the       x       Number of days in the relevant period or
individual during the relevant period  periods”

or periods

7. Section 71(1) of the Administration Act provides:

“71(1)  If:

(a)an amount has been paid to a person by way of family tax benefit, maternity payment or maternity immunisation allowance (the assistance) in respect of a period or event; and

(b)the person was not entitled to the assistance in respect of that period or event;

the amount so paid is a debt due to the Commonwealth by the person.”

8. Section 101 of the Administration Act provides:

“101The 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 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.”

discussion of the evidence

9.      The applicant represented himself.  Ms Powell, a Departmental advocate, represented the respondent (the Department).  The T documents were received into evidence as Exhibit A1, and a letter from the Child Support Agency (CSA), which summarised child maintenance payments made to the applicant between certain dates, was admitted as Exhibit A2.

10.     The applicant disputed that he had been overpaid FTB, or that he should be required to repay that sum if indeed an overpayment had occurred.  He further contended that he should be paid an additional sum of $204.96, being the FTB Part A Supplement that could have been payable to him for the financial year 2003/04. 

11.     The applicant gave evidence that he has the care of his son, Bradley, on two out of three weekends and for half of the school holidays.  This arrangement has been in place since the late 1990s, when he moved back to Adelaide from the Copper Triangle, and through the Family Court established a more comprehensive contact arrangement with his son.  As a result of his increased contact, he became eligible to receive child support from his former partner from around 1999 onwards.  His former partner had been difficult about payments of maintenance, and so small amounts of arrears accrued in every year.  Initially he pursued these arrears, but eventually gave up.  It was only approximately 12-18 months ago that he discovered that he could have arranged for a garnishee of her FTB payment had he made the appropriate application to CSA.  He was incensed that he was not advised of this possible course of action by Centrelink or by the CSA.

12.     In the financial year 2003/04, as a result of action by the CSA, he received some child support arrears, and the assessments provided by the CSA to Centrelink for the purposes of calculating FTB in the first half of that financial year were not representative of maintenance income he actually received in that year because of the receipt of arrears.  He did not dispute that he received $1,658.31 in child maintenance in the financial year 2003/04.

13.     A portion of the child maintenance received in that financial year was arrears for the years 2002 and 2003.  Had that portion of child support that related to those years been attributed to those years, then he would not have incurred any overpayment, and further he believes that he would have been eligible for the additional payment of the FTB Part A Supplement of $204.96, which is payable in certain instances after the conclusion of the financial year to which that payment relates.

14.     After seeking a review of the decision to raise an overpayment, the applicant continued to receive what he referred to as “intimidating letters” about the debt.  He had requested that the Authorised Review Officer (ARO) specifically access information that would have been available to her through the CSA, whereby she could verify the arrears component of the maintenance sum he had received in the financial year ended June 2004, and the periods to which it related.  She declined to do so, and made her decision without having that material before her.  That material is not available to the applicant because of privacy laws, and that information would have verified to the ARO that some of the 2004 child maintenance payments were arrears.

15.     The applicant had sustained spinal injuries, as a result of which he is in receipt of Disability Support Pension.  He does occasional volunteer work, but he said that he frequently needs to take pain killers or lie down.  He manages his budget and finances from week to week.  He budgets well, and tries to keep in front with some debts such as his rental to the South Australian Housing Trust, to ensure that he caters for bills, such as excess water, that may arise.  His current maintenance assessment is $73 per month, and he pointed out that even with this maintenance payment combined with his other social security entitlements he lives below the poverty line.

16.     It was clear in the applicant’s evidence that he did not fully appreciate the way in which the FTB Part A Supplement had been considered, and some time was spent in exploring the method of calculating the debt owed, and in dealing with how the FTB Part A Supplement is assessed.

submissions

17. The applicant’s submission was that the child maintenance income should be treated as income for the year in which it should have been paid. If an overpayment had occurred, then he submitted that because it was such a small overpayment, it should be waived, as under the Administration Act he asserted that debts under $50.00 are routinely waived, and therefore this debt should be waived. He continued to assert that he should be independently paid the FTB Part A Supplement for that year.

18.     The applicant asserted that special circumstances also existed in his case, and that the child maintenance income should be attributed to the year to which it related, rather than to the year in which it was received.  He said that he was in difficult financial circumstances, and would like if possible, to have the rate of deduction reduced if the decision was affirmed.

19.     The Department relied on its Statement of Facts and Contentions.  It submitted that the maximum rate of FTB to which the applicant was entitled had been calculated correctly in that FTB Part A, plus the FTB Part A Supplement had been added together, and were then compared to the actual benefits, plus maintenance income received in the relevant financial year.  As a result of this he was not entitled to the supplement, and an overpayment had occurred.  The Department submitted that maintenance income is maintenance actually received in the financial year, and that there is no provision in the Act to have regard to the fact that it may relate to a period that pre-dated that particular financial year.  It is only capitalised child maintenance that can be considered in that context.

discussion of the evidence, findings of fact and application of the law

20.     The applicant was a straightforward witness.  He considered the situation he found himself in to be unfair.  He had difficulty accepting that a payment that relates to a year prior to a financial year can then be treated as income in that financial year. 

21.     In the financial year ended 30 June 2004, the CSA calculated that the applicant would receive child support income in that year of $931, based on the assessment issued by the CSA on 1 November 2003.

22.     Due to an agreement reached between the CSA and the maintenance payer, arrears of child maintenance that had accrued over the previous two years, 2002 and 2003, were partially paid during the financial year ending 30 June 2004 as a result of which the applicant actually received $1,658.31 in maintenance during the 2004 financial year, some of which comprised arrears payments for the previous two years.  His maintenance income was therefore more than the CSA had originally estimated.

23.     The Department correctly calculated the maximum rate of FTB to which the applicant was entitled in that financial year, based on the level of care that he had of his child.  It was assessed that he had maximum entitlement to $1,793.40 of FTB, and this was achieved by notionally adding in the FTB Part A Supplement allowance.  As the amount he had already received by the end of the financial year, combined with his child maintenance, amounted to $1,855.62, an overpayment of $62.22 had occurred.  He was also ineligible for the supplement because of the total maintenance and social security income received in that year.

24.     The applicant received demanding letters from the Department requesting repayment of the debt at a time when the decision was under review, and this was distressing for the applicant. 

application of the law

25. The effect of the relevant legislation is to annualise the amount of maintenance income received by a person, such that the actual sum received in a financial year is treated as maintenance income in the year in which it is received. There is no provision in the Act that allows the Tribunal to allocate a lump sum of arrears of periodic maintenance received in the year to the year to which it actually relates. Clause 20A(1) and (2) of Schedule 1 to the Act are quite clear in that regard. Nevertheless, there is an exception where capitalised child maintenance is concerned.

26. Capitalised maintenance income is defined in s 3(1) of the Act in the following terms:

“capitalised maintenance income, in relation to an individual, means maintenance income of the individual:

(a)that is neither a periodic amount nor a benefit provided on a periodic basis; and

(b)       the amount or value of which exceeds $1,500.”

27.     The issue of whether lump sum payments of arrears of child support can be treated as “capitalised maintenance income” has been previously considered in the matter of Re Doolin and Secretary, Department of Family and Community Services [2004] AATA 164 at paragraphs 16, 17 and 18. The Tribunal pointed out that capitalised maintenance income is defined as income “which is neither paid as a periodic amount nor provided on a periodic basis and which exceeds $1500”. The payment of arrears in that case was held to be maintenance income. The Tribunal found that Clause 24 of Schedule 1 to the Act which provides for the apportionment of capitalised maintenance “over the whole of the period in respect of which it is received” did not apply.  Arrears of periodic maintenance are not capitalised maintenance income.

28.     In Re Blunden and Secretary, Department of Family and Community Services [2000] AATA 273, His Honour Justice Von Dousa also found that a payment of arrears of maintenance was “maintenance income” “received” by the beneficiary, and he commented (at para 29) that the legislation was “unlimited by any condition requiring that the payment or benefit relate to any particular period …”.

29.     The maintenance received by the applicant in this case was not capitalised maintenance income, nor did it exceed $1,500 in any event.  It was properly annualised by the Department. 

30.     As a result of the annualisation of the arrears of periodic maintenance received by the applicant which arrears related to the years 2002 and 2003, he has found himself in the position where in the financial year of 2004 he received an overpayment of FTB.  If the maintenance could be attributed to the periods to which it related he would have received his maximum FTB in each year, and no overpayment would have occurred in any of the three years in question. 

31. Clause 20A of Schedule 1 to the Act applies with respect to maintenance income, with a specific exclusion for capitalised maintenance income. Clause 20A provides that if an individual receives maintenance income during any period in an income year, then the annualised amount of the maintenance income is worked out using the formula set out at paragraph 6 (supra). If it were capitalised maintenance income, then Clause 24 of Schedule 1 to the Act allows apportionment of the payment over the entire period to which it relates, but as this is not capitalised maintenance income, then it must be annualised as per the formula..

32.     The Tribunal is satisfied that the maximum rate of FTB to which the applicant was entitled in that year has been calculated by adding in the FTB Part A Supplement, and that the overpayment has been correctly assessed. 

33.     It appears to be an unfortunate outcome that the payment of arrears of maintenance can result in an overpayment.  Fortunately, in this instance it is a small overpayment, however the Tribunal notes that this provision has been controversial and has been commented on in previous cases where the sudden collection of substantial arrears by the CSA has caused significant financial embarrassment to single parents when that payment has been allocated solely in the year of receipt.  (see Re Gilbert and Secretary, Department of Family and Community Services [2004] AATA 418).

34.     The applicant points out that had the maintenance been allocated over the whole period in respect of which it was paid, then he would have been entitled to his maximum FTB in each year, plus the FTB Part A Supplement, and he would not have faced any overpayment in any year.  Nevertheless, the law is clear that this arrears payment is to be treated as income in the year in which it is received.

35. The Tribunal had regard to the provisions of s 101 of the Administration Act, which allows for waiver in certain circumstances. Section 101(b) provides that the Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that “there are special circumstances (other than financial hardship alone) that make it desirable to waive …”

36. Section 101 refers to waiver in “special circumstances”, and based on past authorities, and in particular the test of special circumstances as outlined in the case of Re Beadle and Director-General of Social Security (1984) 6 ALD 1, there is nothing exceptional or unusual in this case that would allow the Tribunal to waive the whole or part of the debt. A number of cases have considered the application of this particular provision, and it is quite clear that in this case, the result for the applicant is an intended consequence of the legislation and not a special circumstance.

37. The term “special circumstances” has been given the same interpretation under the Administration Act as it has been given under the Act (see Re Hunnibell and Secretary, Department of Family and Community Services [2004] AATA 992).

38.     In these circumstances the Tribunal affirms the decision under review.  The Tribunal has some sympathy for the applicant.  He must in future ensure that he  actively pursues any arrears of maintenance as and when arrears arise, and he needs to avail himself of any agreement that is in place between the CSA and Centrelink whereby in the event of arrears accruing over a period of time, he can request that Centrelink garnishee the FTB of the payer parent to satisfy the maintenance arrears.

39.     In the circumstances, 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 Senior Member L Hastwell

Signed:         .............J Coulthard......................................

  Associate

Date of Hearing  28 June 2005
Date of Decision  8 July 2005
Counsel for the Applicant         In person
Solicitor for the Applicant          -
Counsel for the Respondent     Ms J Powell
Solicitor for the Respondent     Centrelink Legal Services Branch