Petkovic and Secretary, Department of Family and Community Servic Es
[2003] AATA 635
•4 July 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 635
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2002/1060
GENERAL ADMINISTRATIVE DIVISION ) Re RADIMIR PETKOVIC Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr R G Kenny, Member Date4 July 2003
PlaceBrisbane
Decision The Tribunal affirms the decision under review. (Sgd) R G Kenny
Member
CATCHWORDS
SOCIAL SECURITY – overpayments of parenting payment – debts due to Commonwealth – variation of decision after determination by Social Security Appeals Tribunal – write off of debts – waiver of debt – special circumstances
Pay-Roll Tax Assessment Act 1941 s 28
Social Security Act 1991 ss 8, 23, 503, 1068A, 1073, 1222A, 1223, 1236, 1237A, 1237AADSocial Security (Administration) Act 1999 s 180
Beadle v Director-General of Social Security (1985) 7 ALD 670
Commissioner of Taxation v Barrett (1973) 129 CLR 395
Re Ekis and Secretary, Department of Family and Community Services [1999] AATA 422
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Harris v Director General of Social Security (1985) 59 ALJR 729
Re Beadle and Director-General of Social Security (1984) 1 AAR 362
Re Laman and Secretary, Department of Family and Community Services (1998) AATA 337
Re Secretary, Department of Family and Community Services and Lennon [1999] AATA 368 Secretary, Department of Family and Community Services v Rolley (2000) 175 ALR 4
Secretary, Department of Social Security v Ekis (1998) 57 ALD 219
Re Turk and Secretary, Department of Family and Community Services [2000] AATA 103
Re Ward and Secretary, Department of Family and Community Services [2000] AATA 212REASONS FOR DECISION
4 July 2003 Mr R G Kenny, Member Application
1. On 22 July 2002, a delegate of Centrelink, on behalf of the Secretary, Department of Family and Community Services (the respondent), determined that Radimir Petkovic (the applicant) had been overpaid an amount of $28,076.18 by way of parenting payment under the Social Security Act 1991 (the Act) and that this was a debt due by him to the Commonwealth (see T44). That decision was affirmed by an authorised review officer on 11 September 2002 (see T56) and, on 21 October 2002, the Social Security Appeals Tribunal affirmed that decision (see T3). On 4 December 2002, the applicant lodged an application for review of the decision by the Administrative Appeals Tribunal (the Tribunal) (see T1). On 14 April 2003, a further delegate of the respondent recalculated the debt and varied the decision by increasing the debt to $32,565.28 (see S4).
2. The respondent was represented by Mr T Ffrench. The applicant attended the hearing but was not represented. In evidence were the following:
§exhibit 1 T documents (T1–T60);
§exhibit 2 supplementary T documents (S1–S7);
§exhibit 3 a statement, dated 12 June 2003, from the applicant;
§exhibit 4 a statement of facts and contentions by the applicant; and
§exhibit 5 a bundle of receipts for medical treatment.
Issues and Legislation
3. It is not disputed that the applicant was paid parenting payment (single) under the Act from 23 July 1998 until 3 July 2002 or that, during that period, the applicant worked as a real estate sales person. Also, it is not disputed that the level at which parenting payment is paid under the Act is calculated in accordance with a recipient’s income levels. In this case, the respondent contended that the applicant provided incorrect information about his income and that, as a result, he was paid an amount of parenting payment to which he was not entitled and which constitutes a debt owed by him to the Commonwealth.
4. The provisions of the Act which relate to the calculation of parenting payment (single) are sections 8, 23, 503, 1068A and 1073. In so far as relevant, these read:
“Income test definitions
8(1) … ‘income’, in relation to a person, means:
(a) an income amount earned, derived or received by the person for the person's own use or benefit; or
(b) a periodical payment by way of gift or allowance; or
(c) a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8);
‘income amount’ means:
(a) valuable consideration; or
(b) personal earnings; or
(c) moneys; or
(d) profits;
(whether of a capital nature or not);
‘income from personal exertion’ means an income amount that is earned, derived or received by a person by way of payment for personal exertion by the person but does not include an income amount received as compensation for the person's inability to earn, derive or receive income through personal exertion;
‘ordinary income’ means income that is not maintenance income or an exempt lump sum.
8(2) A reference in this Act to an income amount earned, derived or received is a reference to:
(a) an income amount earned, derived or received by any means; and
(b) an income amount earned, derived or received from any source (whether within or outside Australia).
…
General definitions
23 … ‘social security payment’ means:
(a) a social security pension; or …
‘social security pension’ means: …
(e) a pension PP (single); …
…
How to work out a person's parenting payment rate
503 A person's parenting payment rate is worked out using:
(a) if the person is not a member of a couple-the Pension PP (Single) Rate Calculator at the end of section 1068A (see Part 3.6A); or …
…
Rate of parenting payment-pension PP (single)
1068A(1) If a person is not a member of a couple, the person's rate of parenting payment is the pension PP (single) rate.
1068A(2) The pension PP (single) rate is worked out in accordance with the rate calculator at the end of this section.
…
Module E-Ordinary income test
Effect of income on maximum payment rate
1068A-E1 This is how to work out the effect of a person's ordinary income on the person's maximum payment rate:
Method statement
Step 1. Work out the amount of the person's ordinary income on a yearly basis.
Step 2. Work out the person's ordinary income free area (see points 1068A-E14 to 1068A-E18 below).
Note: A person's ordinary income free area is the amount of ordinary income that the person can have without any deduction being made from the person's maximum payment rate.
Step 3. Work out whether the person's ordinary income exceeds the person's ordinary income free area.
Step 4. If the person's ordinary income does not exceed the person's ordinary income free area, the person's ordinary income excess is nil.
Step 5. If the person's ordinary income exceeds the person's ordinary income free area, the person's ordinary income excess is the person's ordinary income less the person's ordinary income free area.
Step 6. Use the person's ordinary income excess to work out the person's reduction for ordinary income using points 1068A-E19 and 1068A-E20 below.
…
Certain amounts taken to be received over 12 months
1073(1) Subject to points 1067G-H5 to 1067G-H20 (inclusive), 1067L-D4 to 1067L-D16 (inclusive), 1068-G7AA to 1068-G7AR (inclusive), 1068A-E2 to 1068A-E12 (inclusive) and 1068B-D7 to 1068B-D18 (inclusive), if a person receives, whether before or after the commencement of this section, an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part; and
(b) is not:
(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum;
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.”
3. The provisions in the Act which relate to the raising of a debt are sections 1222A and 1223 which, in so far as relevant, read:
“Debts due to the Commonwealth
1222A If an amount has been paid by way of social security payment under this Act or the 1947 Act, or by way of fares allowance under the Social Security (Fares Allowance) Rules 1998, the amount is a debt due to the Commonwealth if, and only if:
(a) a provision of this Act, the 1947 Act, the Social Security (Fares Allowance) Rules 1998 or the Data-matching Program (Assistance and Tax) Act 1990 expressly provided that it was or expressly provides that it is, as the case may be; or
(b) the amount:
(i) should not have been paid; and
(ii) was paid bef ore 1 January 1991; and
(iii) was not an amount to which subsection 245B(2) of the 1947 Act applied.
Debts arising from lack of qualification, overpayment etc.
1223(1) (Pre-1 July 2000) Subject to this section, if:
(a) a social security payment is made; and
(b) the amount was not payable
the amount so paid is a debt due to the Commonwealth.
1223(1) (from 1 July 2000) 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.”
5. The provisions which relate to writing off and waiver of a parenting payment debt are sections 1236, 1237A and 1237AAD of the Act. In so far as relevant, these read:
“Secretary may write off debt
1236(1) Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
1236(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c) the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d) it is not cost effective for the Commonwealth to take action to recover the debt.
1236(1B) For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(a) the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in section 1231, 1232 or 1233 has elapsed; or
(aa) the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance) (Administration) Act 1999 has elapsed; or
(b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d) the debtor has died leaving no estate or insufficient funds in the debtor's estate to repay the debt.
1236(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a) deductions from the debtor's social security payment; or
(b) deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or
(c) setting off under section 84A of that Act;
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
1236(2) A decision made under subsection (1) takes effect:
(a) if no day is specified in the decision-on the day on which the decision is made; or
(b) if a day is specified in the decision-on the day so specified (whether that day is before, after or on the day on which the decision is made).
1236(3) Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.
Power to waive Commonwealth's right to recover debt
Secretary's limited power to waive
1237(1) On 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.
When waiver takes effect
1237(2) A 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.
Waiver of debt arising from error
Administrative error
1237A(1) Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
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).
1237A(1A) Subsection (1) only applies if:
(a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or
(b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;
whichever is the later.
Proportion of a debt
1237A(3) For the purposes of this section, a proportion of a debt may be 100% of the debt.
Waiver in special circumstances
1237AAD 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 false representation; or
(ii)failing or omitting to comply with a provision of this Act or the 7947 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.”
6. The applicant’s debt has, as noted above, been increased since the decision was made by the Social Security Appeals Tribunal. In that regard, sub-section 180(1) of the Social Security (Administration) Act 1999 (the Administration Act) reads:
“Variation of decision before AAT review completed
180(1) If an officer varies a decision after an application has been made to the AAT for review of that decision but before the determination of the application, the application is to be treated as if:
(a) the decision as varied had been affirmed by the SSAT; and
(b) the application were an application for review of the decision as varied.”
7. The issues for the Tribunal to determine are whether there is a parenting payment (single) debt owed by the applicant to the Commonwealth, what the amount of any such debt is and whether any such debt is to be written off or waived.
Applicant’s Evidence
8. The applicant gave the following evidence.
9. The applicant made a claim for parenting payment on 14 July 1998 in respect of his son, Daniel, who was born on 18 September 1986. At the time, he was completing a traineeship in real estate selling with Richardson and Wrench Real Estate, which was initially trading as Richardson and Wrench Real Estate. After obtaining his real estate certificate, he left that agency in July 1999 and, after a short period where he was not working, he started as a real estate sales person with Peterson’s Real Estate where he worked from 1 September 1999 until 26 March 2002. Since 1 April 2002, he has worked as a real estate sales person for Nationwide Real Estate. All of these businesses operated in Gympie.
10. The applicant described the manner in which he received remuneration for his work. He was paid on a commission only basis. However, he did not receive lump sum payments which related to particular sales. Rather, he was paid a regular weekly sum. When he was a trainee, these sums were set off against future commissions which were held by the principal of the firm. When he worked for Petersen’s and Nationwide, he was paid the weekly sum out of accrued commission amounts which, again, were held by the respective principals. With each of the agencies, taxation deductions were taken from his fortnightly payment by the principal. At no stage during the period that he was engaged by these agencies was there a time when he did not receive a weekly payment.
11. The applicant described the arrangements that he had for undertaking his work. As he did not have a real estate licence, he was required to work under the licence of another person and his certificate only enabled him to act as an agent in that manner. He was responsible for all of the costs associated with his vehicle and with his home and mobile telephones. He was given flexibility in his working hours and in the amount of time he spent in the agency office where he was provided with a desk and a telephone and the assistance of a typist. However, there was an expectation that he would attend the office each working day. He was obliged to share a percentage of his commissions with the principal of the agency and, where relevant, another salesperson who had listed a property. There were no requirements to wear particular clothing as long as he maintained a neat and tidy appearance. At Petersen’s, there was a meeting of all staff once each month to discuss the business of the agency. At Nationwide, this was done less formally and the purpose was to allow sales persons to discuss the prospect of matching the needs of prospective buyers and sellers. He was not subject to supervision but was aware that, if his performance had not been satisfactory, he would not have been continued. He utilised the standard form contract published by the Real Estate Institute of Queensland (REIQ) but would sometimes consult with a solicitor in relation to the wording of special clauses in the contract.
12. The applicant referred to the costs associated with advertising of premises for sale. These were usually borne by the vendor but, at Nationwide, the principal sometimes shared these if the vendor was dealing exclusively with that agency. He was responsible for the wording of advertisements which carried both the name of the agency and his own name and contact details. He used advertising signs supplied by the principal but was responsible for the content of these.
13. In relation to whether he was able to work for more than one principal at the same time, he said that it might be possible but that it was not practical. He had signed an agreement with each principal and worked solely for the one agency at any given time. These agreements were not materially different from each other.
14. The applicant said that, at all times, he believed that he was a self-employed person rather than an employee. He agreed that he had described himself as an employee on his parenting payment claim form but referred to a “Profit and Loss Proforma” that he had lodged with his claim form where he had detailed his motor vehicle and telephone expenses. He said that he was told by a Centrelink officer when his claim was being processed that he would be treated as being self-employed and that his parenting payment would be based on his taxable income. He said that he was also told that the Centrelink computers and those of the Australian Taxation Office were linked so that Centrelink would be aware of what his income was. He said that he was told “not to worry” about the details of his income in correspondence that he received from Centrelink.
15. The applicant said that he had received letters from Centrelink about his parenting payment and had noted that, in some of these, he was assessed on the basis of an annual income of 15 cents. He said that this caused him to make telephone calls to Centrelink to point out the incorrectness of this but, on each occasion, he was again given the same information as he had been given when making the initial claim. He said that he could not recall how many times he rang Centrelink, or when he did so or in relation to which Centrelink letters he made the calls. He also said that he had provided profit and loss statements to Centrelink on each occasion that he had been asked to do so. He recalled the initial one which was part of his claim and had retained a copy of another that he lodged with Centrelink on 24 May 2002 (T25). He said that there had been two others lodged between July 1998 and May 2002 but he had not kept a copy of either of these.
16. The applicant agreed that his parenting payment had increased by about $100 in the period when he was not working in 1999 after he ceased with Richardson and Wrench and had remained at that level after he began with Petersen’s. In response to a question from Mr Ffrench, he said that he did not think that this was odd because he believed that “Centrelink works in mysterious ways” and were responsible for sending letters to him with many inconsistencies in them. He also said that there were sometimes variations due to cost of living adjustments and changes to the level of the Family Allowance which he was also receiving. The applicant then said that he was not aware of the amount that he had been paid by way of parenting payment because it was paid directly into his bank account and he did not monitor it. He was referred to a Declaration Form that he signed on 14 July 1998 when he made his initial claim. He agreed that it contained a statement that he would notify Centrelink within 14 days if there was a change to circumstances including if he took up employment, received income from any other source or if his income changed. He agreed that he had signed it but said that he had not read the form because he had been required to fill out so many of them.
17. The applicant was referred to a statement that was completed on 20 November 1998 where it is stated that he was employed as a real estate trainee and that he received $268.73 gross per fortnight. He agreed that he had signed the statement but that it had been written by a Centrelink officer. The applicant was unable to explain the difference in that income amount and an entry in a wages book which showed him to have been paid $716.00 gross for each fortnight from August 1998 until June 1999 while he was with Richardson and Wrench.
18. The applicant referred to his present situation. He is earning $700 per week (after tax) but is uncertain of the future because of the unpredictability of the real estate market. He has had medical expenses relating to treatment for his partner, who is not in employment, and also his sons, three of whom now live in the Gympie area. He has consolidated his debts into a single loan which requires repayments of $150 per week. This includes repayments on his own home as well as another home that he purchased earlier this year and which his older sons will live in. He said that he was making repayments of the parenting payment debt through a reduction in the amount of family allowance that he is receiving and he said that, currently, he is “making ends meet”.
Other Evidence
19. As part of its investigations, the respondent contacted the principal of Nationwide Real Estate, Helene Faint, who provided a statement in relation to the applicant’s work arrangements (see T36). She said that the applicant had signed a written contract of service with Nationwide, that he was regarded as an employee and that he was not free to work for any other organisation. She also said that he was expected to attend the Nationwide office daily and to perform rostered duties, that tax instalments and superannuation levies were deducted by Nationwide from commission payments made to him and that, in the event that he were to leave Nationwide’s employment, there was a requirement that he give a period of notice.
20. An officer of Centrelink completed a file note after speaking with Helene Faint from Nationwide Real Estate as well as Liz Haber and Jan Chippendall, the principals of Pedersen’s Real Estate and Richardson and Wrench Real Estate, respectively (see T29). There, Ms Faint is reported as stating that the applicant was paid commissions but that these were paid to him by way of regular withdrawals rather than as a lump sum. Ms Haber is reported as advising that the same arrangement was in place in Pedersen’s. However, Ms Chippendall is reported as advising that he was paid a wage rather than a commission on sales.
Applicant’s Case
21. The applicant submitted that he had always considered himself to be self-employed and that he should be able to take into account as business deductions all of the expenses associated with his real estate selling activities. He also submitted that he had always provided the respondent with information about his income whenever he had been asked for it and that he had provided profit/loss statements on at least four occasions and that, therefore, the error in calculating the amount of his parenting payment was due to error which was made solely by the Commonwealth. He also submitted that he had received the payments in good faith because he trusted Centrelink to make the calculations correctly. He submitted that Centrelink was responsible for the debt because, right from the time of his claim, he had been told that he did not need to worry about providing advice about income because of Centrelink’s ability to obtain relevant information from the Australian Taxation Office. He also submitted that, while he was managing financially at the moment, he was concerned about the future because of uncertainties in the real estate market and because of health and emotional problems in his children and his partner.
Respondent’s Case
22. Mr Ffrench submitted that the applicant had been continuously in receipt of parenting payment single from 23 July 1998 to 3 July 2002 during which period he had worked as a real estate agent. He submitted that, in that capacity, he was an employee rather than a self-employed person and he relied on the High Court decision in The Federal Commissioner for Taxation v Barret (1973) 129 CLR 395 as authority for that proposition. He also referred to point 4.3.3.20 of the Guide to Social Security Law where real estate agents who are engaged on a commission only basis are described as employees and where various factors are nominated as being of relevance in making that categorisation. He conceded that, in Re Ekis and Secretary, Department of Family and Community Services [1999] AATA 422, the Tribunal had reached the opposite conclusion but he distinguished that case on the basis that, unlike the applicant, the sales person there was the principal of the agency.
23. To support the status of the applicant as an employee, Mr Ffrench referred to the regular periodic payments made to him, to the deduction of taxation from those payments, to the keeping of wages books in relation to him, to the manner that he described himself in his initial claim and also to the information provided by the principals of the three real estate agencies for which he worked. He also submitted that the inability of the applicant to work independently of a person with a real estate licence confirmed his position as an employee of the agency where the licence was held.
24. Mr Ffrench then submitted that, as the applicant was an employee, this meant that his business expenditure could not be deducted from his income for the purposes of calculating his income under the Act and that, therefore, his gross income must be used to calculate parenting payment. Further, he submitted that the applicant’s income was paid to him as ordinary income from remunerative work and that this meant that the calculation method in section 1073 of the Act, which enables a weekly sum to be 1/52 of an annual salary, was not open. Rather, he submitted, some other means had to be adopted. He referred to the terms of point 1068A-E1 of the Act as specifying that the applicant's income must be worked out “on a yearly basis”.
25. As to the meaning of the term “a yearly basis”, Mr Ffrench referred to the decision of the High Court in Harris v Director-General of Social Security (1985) 59 ALJR 729, and to the Tribunal decision of Re Secretary, Department of Family and Community Services and Rolley (2000) 175 ALR 4 as authority for the view that a fair method of ascertaining the current rate of income at a particular time must be employed. He submitted that this had been done in the applicant’s case by utilising a 12 weekly average of his income. Further, he submitted that this income, when considered on that basis, was such that the applicant was paid parenting payment amounts to which he was not entitled and that, when the rate calculator under the Act and actual income amounts as calculated over 12 week periods were considered, the amount of the overpayment to him was $32,565.28 which was a debt due by him to the Commonwealth.
26. Mr Ffrench also made submissions on whether or not the debt should be recovered by the Commonwealth. He submitted that it was not appropriate to write off the debt under section 1236 of the Act because the debt was not irrecoverable at law and the applicant had the capacity to repay the debt, albeit by deductions from his earnings or family allowance payments. Mr Ffrench also referred to waiver of the debt under sections 1237A and 1237AAD of the Act. In relation to section 1237A, he submitted that it had not arisen solely because of administrative error on the part of the Commonwealth because the applicant had contributed to it by not providing relevant information when requested to do so. In relation to section 1237AAD, he submitted that the applicant’s situation did not amount to special circumstances as required by that provision.
Consideration
27. The decision of the Social Security Appeals Tribunal was made on 21 October 2002 (see T2) and related to a debt of $28,076.18 which was calculated on an annual rate of income based on an averaging of income over a year under section 1073 of the Act. The application for review of that decision by the Tribunal was lodged on 4 December 2002 and the decision to vary the amount dealt with in the Social Security Appeals Tribunal decision to $32,565.28 was made on 14 April 2002 (see S4). This means that the terms of sub-section 180(1) of the Administration Act, set out above, have been met and the application for review is to be treated as if the decision, as varied, had been affirmed by the Social Security Appeals Tribunal and as if the application were an application for review of the decision as varied. This means that the decision under review relates to the amount of $32,565.28 which was calculated by taking the annual rate of income based on an averaging of income over 12 week periods rather than over 52 weeks.
28. The applicant has not disputed that he was overpaid an amount of parenting payment or that this overpayment arose because incorrect income levels were relied on by the respondent in calculating the amount of parenting payment that he received. However, he submitted that he should be treated as being self-employed so that his business expenditure may be taken into account to reduce the level of income relied on by the respondent. This would have the effect of reducing the amount of the debt raised against him. He has also submitted that the debt should be waived.
29. The relevant rate of parenting payment in this case is the single rate and section 503 of the Act provides that a person's parenting payment (single) rate is worked out by using the rate calculator at the end of section 1068A. A step by step procedure for doing this is given in section 1068A-E1 of the Act and the first such step requires the calculation of ordinary income on a yearly basis. Before completing this step, two matters need to be considered. These are whether expenditure incurred by the applicant in the process of making sales constitutes a permissible deduction from his income and what is meant by the ordinary income on a yearly basis in his case.
30. As to the first of the matters, expenditure incurred may only be deducted from the applicant’s income if, under sub-section 1075(1) of the Act, he was carrying on a business rather than working as an employee. In Commissioner of Taxation v Barrett (1973) 129 CLR 395, Stevens J determined that, for the purposes of legislation dealing with pay-roll tax (the Pay-Roll Tax Assessment Act 1941 (Cth)), land salesmen who were paid on a commission only basis were held to be employees. His Honour referred to a range of factors that led to that conclusion and said (at 407-8):
“There emerges from the evidence a picture of a staff of land salesmen who enjoy a settled and permanent relationship with the respondents, although it is subject always to termination by either party, and who work exclusively for the respondents in their chosen vocation of land salesmen, receiving their commission remuneration from the respondents and conforming to the respondents' requirements concerning ethical conduct, compliance with the law and observance of approved procedures in the negotiation of sales. They are otherwise free from supervision in their primary task of effecting land sales, a task calling for highly individual qualities and a willingness to work at odd hours when the community at large is not at work. This lack of supervision is in large measure accounted for by the nature of their work and their careful selection and resultant skill and responsibility, coupled with the fact that payment by commission itself provides adequate incentive so as to safeguard the interests of the respondents. Even without reference to their rostered duties and the other tasks to which they may from time to time be directed by the respondents I would conclude from the foregoing that, whichever of the acknowledged tests of an employer-employee relationship may be applied, the conclusion must be that such a relationship does exist in the present case.”
31. In Secretary, Department of Social Security v Ekis (1998) 57 ALD 219, the Federal Court remitted to the Tribunal a matter relating to the characterising of the employment status of a real estate agent. There, Drummond J described the test utilised in Barret as a control test relating to the degree of actual or potential supervision involved in his work environment. His Honour also referred to a more flexible test which involves a consideration of the various features of the relationship between the parties. When the matter was remitted to the Tribunal, the control test was utilised and, as the agent was not subject to the degree of control that had been demonstrated in Barret, she was found to be an independent contractor: see Re Ekis and Secretary, Department of Family and Community Services [1999] AATA 422.. In that case, the agent was a licensed real estate agent who was entitled to trade as such on her own account and who was not obliged to operate only through a particular franchise. This was specifically relied upon by the Tribunal in reaching its decision. That raises an important distinction from the applicant’s case as he was not the holder of a licence. I accept the submission of Mr Ffrench that the present situation can be distinguished from Ekis on that basis: see also Re Laman and Secretary, Department of Family and Community Services (1998) AATA 337.
32. The description of the relationship in Barret reflects, in the main, the nature of the relationship between the applicant and the respective agencies for whom he has worked. On his own evidence and that of the principals of the three agencies, I am satisfied that, despite significant freedom in the manner that he conducted his sales program, he had limitations imposed upon him which made him an employee rather than an independent contractor. He was expected to attend the agency office daily and to perform rostered duties, he had tax instalments and superannuation levies deducted from commission payments made to him and was required to use the standard REIQ contract. To some extent, the applicant had some control over advertising but, even there, he had no financial responsibility for advertisements and all advertisements were published under the agency name with his name being used only for contact purposes.
33. On the basis that he was an employee, the applicant’s work-related expenses are not able to be deducted and his gross income must be taken into account in the application of the income test under the Act.
34. As to the second matter, it is well settled that the term ordinary income on a yearly basis is not necessarily determined by taking a person’s income in a given period, say a fortnight, and calculating ordinary income on a yearly basis as being 26 times that amount. It may be appropriate to adopt that process in the case of a person who has a constant level of income and who is employed throughout the year. However, where a person is not in that position, unfairness may arise in situations where the monies received in the period are not representative of amounts received in the remainder of a year. The matter was considered by the High Court in Harris v Director General of Social Security (1985) 59 ALJR 729 in relation to subsection 28(2) of the now repealed Social Services Act 1947, the predecessor of the current legislation, where the reference was to the “annual rate" of income and the interpretation by the High Court has been adopted in relation to the provisions of the Act: see Re Secretary, Department of Family and Community Services and Lennon [1999] AATA 368 (at paragraph16), Re Turk and Secretary, Department of Family and Community Services [2000] AATA 103 (at paragraph 15) and Re Secretary, Department of Family and Community Service and Rolley (2000) 175 ALR 4 (at 11).
35. In Harris, Gibbs CJ, Brennan, Deane and Dawson JJ said (at 196):
"The distinction between an annual amount of income and an annual rate of income is critical to an understanding of s 28(2). If an annual amount of income were a component in the s 28(2) calculation, it would be necessary to identify a commencing date of the income year in order to ascertain what receipts fell into one year and what into the next. But a rate of income, like a rate of interest, may vary within any annual period though it is expressed as an annual rate. It is a current rate of income, expressed as so much per annum. An annual rate of income may not subsist for a year: an annual rate of income that obtains in one week may change in the week following. Annual income is the sum of the products of each annual rate of income that obtained during any part of the year multiplied by the fraction of the year during which it obtained.
Income can be derived from various sources, as the definition of "income" in s 18 makes clear. Some items of income may be received at frequent and regular intervals during a year (for example, weekly or fortnightly wages paid to an employee), some intermittently (for example, profits of a business) and others at lengthy intervals (for example, annual dividends or shares). Subject to the exceptions stated in the s 18 definition and subject to the limitations expressed in s 29, no income derived from any source is to be let out of account in ascertaining the annual rate of income. At the time when an annual rate of income is ascertained, it is necessary to have regard to the pensioner's sources of income at that time and to find what each of those sources would yield over the period of a year assuming the current yields from those sources were to continue. It is not necessary to predict whether the pensioner will retain his sources of income for the year or whether the current yields will be maintained, for the annual rate of income is the current rate of income though it is calculated and expressed as an annual rate. If the current income from a current source is receivable as so much per week or per month, it must be calculated and expressed as an amount per annum. But an annual rate of income is not ascertained merely by extending to a year the income receipts of a shorter period without considering the period in respect of which the particular item of income has been received. A pensioner whose only income apart from his pension is $1000 paid annually as a dividend on an investment has an annual rate of income of $1000. It is wrong in law as it is absurd in fact to say that he has an annual rate of income of $52,000 in the week in which he receives the dividend and a nil rate of income for 51 weeks of the year. His investment, the source of his income, yields an annual sum and, so long as the pensioner retains the investment, his annual rate of income from that source will be $1000. If that source of income were lost, the annual rate of income from that source would be reduced to nil from the time of the loss. When a pensioner is in receipt of weekly wages from employment, however, his annual rate of income from that source is calculated on the assumption that his earnings at the current rate will continue for the year. If he were to retire from work, that source of income would be gone and the annual rate of income attributable to that source would be nil. In cases where pensioners or claimants are employed intermittently, it may be appropriate in some cases to treat the intermittent work as a continuing source of income and to take an average of earnings over a period as the yield from that source, and in other cases to treat each employment as a separate source of income yielding its particular amount of earnings. The former method would establish a comparatively constant annual rate of income; under the latter method, the annual rate of income would change as the pensioner or claimant went into and out of employment. The circumstances of the particular case would show which method is more appropriate.
Similarly, if a change occurs in the level of income derived from a particular source, the new level is the basis on which, from the time of the variation, the annual rate of income attributable to that source is to be calculated. If a pensioner is in casual employment earning different amounts each week, as Mrs Harris was, it may be appropriate - it is a question of fact - to determine the annual rate of income attributable to casual employment by striking an average of earnings over a period. Section 45(1) refers to a period of eight consecutive weeks. Although that provision relates to notification, not calculation, it may be administratively sound in many cases to strike an average over a period of eight weeks. But the circumstances of the case must determine what is a fair method of ascertaining the current rate of income at a particular time. The rolling periods of eight weeks referred to in s 45(1) do not impose a restriction on the fair methods of ascertaining the current rate of income.
An annual rate of income, at whatever time it is ascertained for the purposes of s 28(2), is the aggregate of those income payments which would be received by the pensioner during the ensuing year on the assumption that he retains all his current sources of income for the year and that they continue to yield income at the current level. The annual rate thus ascertained ensures until something occurs which falsifies the assumption on which the particular annual rate was ascertained - that is, until a source of income is gained or lost, or the level of income yielded by a source of income changes. Then a new annual rate of income must be ascertained on a new set of assumptions that accord with the then current sources of income and the then current levels of income yielded by those sources. If the s 28(2) rate changes, then pension that is being paid should be changed pursuant to s 46(1)."
36. In Re Turk and Secretary, Department of Family and Community Services (above), the Tribunal noted the reference in Harris to the need to determine what is a “fair method of ascertaining the current rate of income at a particular time” and said that the criterion is not simply one of general fairness but of “appropriateness, having regard to the nature of the income and the way in which it was derived” (at paragraph 18). In the present case, the applicant’s income varied in both form and amount from employer to employer. In evidence were the payment records of the agencies for whom he worked. The wages book from Richardson and Wrench shows that he was paid $716.00 each fortnight: see T36-102. On the basis of those payments and the evidence of the principal of that agency, I am satisfied that he was paid a wage in those amounts rather than on a commission basis during that period. The payment records from Petersen’s support the position that the applicant was paid commissions on sale but that the sum of individual commissions was not paid to him in a lump sum (see T36-103 to 128). Rather, each commission was divided into components and paid to him on a periodic basis. The amounts varied from $109.35 on 25 July 2001 to several payments of $1,000 towards the end of his time with that agency. The records also show that the payments were not made on a regular basis with intervals varying from a few days to more than a fortnight. The statement by the principal of Nationwide shows that the applicant was paid a constant sum of $500.00 for periods varying from 2 days to 7 days (see T36-160 to 162).
37. Under section 1073 of the Act, income in the form of capital receipts may be averaged over 12 months but that provision does not apply to ordinary income from remunerative work undertaken. Because the income of the applicant was from remunerative work undertaken by him as an employee, I am satisfied that this provision is not applicable to him.
38. In Harris(above), the High Court approved the use of an averaging approach over a period where a pensioner fluctuated between sessions of casual employment and sessions of non-employment. I am satisfied that this is also an appropriate approach where, as in the present situation, the person earns significantly different levels of income at various times throughout a year. Here, the respondent annualised the applicant’s income on the basis of average earnings over 12 week periods and I am satisfied that this was a fair and appropriate approach to determining his ordinary income on a yearly basis for the purposes of the rate calculator.
39. The respondent’s calculations were set out in a table in the following way (see S3-38) and I am satisfied that the entries correctly record the applicant’s income in the periods noted:
12 week period
commencingtotal earnings
$per annum average
$24 July 1998 3,921.60 16,993.60 16 October 1998 4,653.60 20,165.60 8 January 1999 4,594.00 19,907.33 2 April 1999 3,878.00 16,804.66 29 September 1999 5,108.40 22,136.40 22 December 1999 4,559.95 19,759.78 15 March 2000 5,291.50 22,929.83 7 June 2000 9,823.00 42,566.33 30 August 2000 5,756.00 24,942.66 22 November 2000 9,200.00 39,866.66 14 February 2001 8,766.42 37,987.82 9 May 2001 7,290.95 31,594.12 1 August 2001 7,036.75 30,402.58 24 October 2001 6,194.25 26,841.75 16 January 2002 12,150.00 52,650.00 10 April 2002 6,793.83 29,439.93
40. In reliance on the figures in that table, the respondent calculated the applicant’s entitlement to Newstart Allowance and determined that he had been overpaid the amount of $32,565.28. I am satisfied that this was correctly determined in accordance with the requirements of section 503 of the Act. I am also satisfied that the payments that went to make up that total were not payable to him and that the amount constitutes a debt in accordance with the terms of sub-sections 1223(1) and (5) of the Act.
41. The provision in respect of writing off a debt is set out above: see section 1236 of the Act. Write off applies if the debt is irrecoverable at law, if the debtor has no capacity to repay the debt, if the debtor's whereabouts are unknown or if it is not cost effective for the Commonwealth to take action to recover the debt. The last two of those requirements do not arise and neither of the first two is met. In particular, in order for a debt to be irrecoverable at law, it must not be able to be recovered by means of deductions. The applicant is making repayments by deduction from current family tax benefit payments. Therefore, they are not irrecoverable in accordance with the provision and he has a capacity to repay the debt. I am satisfied that the write off provision is not applicable in this case.
42. A debt may be waived under section 1237A of the Act if, among other things, it was attributable solely to an administrative error made by the Commonwealth and the term “solely” as it is used in that provision, has been held to mean “exclusively”, “only” or “to the exclusion of all else”: see Re Ward andSecretary, Department of Family and Community Services [2000] AATA 212. In this case, the initial advice to the applicant about his parenting payment was by letter dated 14 July 1998 (see T6). Therein, he was advised that his yearly income was assessed on the basis of financial investments of $0.87 and earnings of $6,987.00. The earnings figure appears to have been based on the information provided by the applicant in the Profit and Loss Proforma that was attached to his claim (see S1-24). There, he gave his income as $3,237.00 over 13 weeks and his expenses related to his sales activities as $1,490.00 over 13 weeks. This reveals a profit of $1,747 which, when annualised, amounts to the earnings figure in the letter and tends to support the applicant’s evidence that he was being treated as a self-employed person. However, the income level that he gave is not the same as that which appears in the wages book of his employer, Richardson and Wrench Real Estate, at that time. Also, the letter required the applicant to advise Centrelink if his income increased. This occurred within a fortnight of commencing work and the wages book shows that he was paid $716.00 per fortnight from August 1998 until June 1999. The applicant was sent further letters dated 17 and 21 August 1998 with the same income details as in the previous letter (see T7- 46, 48).
43. Another letter was sent to him on 19 November 1998 advising that his parenting payment would cease because he had not lodged a review form (see T11-53). That letter repeated the same income information as the previous letters. On 20 November 1998, the applicant signed a statement in which were set out various matters relating to his living arrangements and his financial position (seeT12-56). Therein, it was declared that his fortnightly gross income was $268.73. Again, that is significantly less than the amount recorded in the wages book of Richardson and Wrench Real Estate. The applicant’s parenting payment continued thereafter and a letter was sent to him on 3 December 1998 advising him that his annual income was based on investments of $0.15 and earnings of $6,986.00 (see T13-58). The earnings figure is annualised from the fortnightly amount given in the statement signed by the applicant in November 1998.
44. Letters sent to the applicant on 30 June 1999 (T16), 1 July 1999 (T17), 8 July 1999 (T18) and 4 September 2001 refer only to income of $0.15. He gave evidence that he contacted Centrelink in relation to those amounts but was advised “not to worry” about advising what the income levels were. He could not recall how many times or in relation to which letters he did this.
45. The applicant said in his evidence that, in addition to the initial form that accompanied his claim and a recent statement of which he has retained a copy, he lodged two other statements relating to profit and loss. These do not appear in the Centrelink records but a file note completed by a Centrelink officer on 30 June 1999 indicates that a document was sighted at that time indicating the commission he received and his expenses (see T15). That file note also states that the applicant was to provide profit and loss statements on a monthly basis.
46. I am satisfied that Centrelink officers provided the applicant with inconsistent advice from time to time in relation to the information required about his income. However, despite that, I am also satisfied that the applicant gave incorrect income details to Centrelink and that this contributed to the incorrect levels of parenting payment that he received. This means that the overpayment was not due solely to error on the part of the Commonwealth and that the debt may not be waived under section 1237A of the Act.
47. An alternative waiver provision is in section 1237AAD of the Act which is set out above. It requires that there be special circumstances to justify that action. The Act does not provide guidance as to the meaning of the term special circumstances in that provision. In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Court of the Federal Court, in dealing with the phrase, stated that it was not possible to lay down precise limits or precise rules for the meaning of the term. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 674). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security (1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances must be “unusual, uncommon or exceptional” and must have a “particular quality of unusualness that permits them to be described as special".
48. In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle, observed (at 545) that special circumstances:
“would require something to distinguish… [the] case from others, to take it out of the usual or ordinary case. … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.”
49. In this case, the applicant has relied on his family circumstances including those associated with the health of his children and his partner to bring him within the ambit of the special circumstances provision. I am satisfied that there have been and that there are continuing concerns for him in that regard. However, I am also satisfied that these are not major concerns and I note that he has been able to meet the costs associated with these medical issues. A further matter referred to by the applicant is the situation of his future employment in real estate sales. However, while this is unpredictable, a degree of uncertainty about employment prospects in the future is not unusual, uncommon or exceptional. l am satisfied that there is nothing in this case that gives it the character of unusualness or unfairness and I am satisfied that there are no special circumstances in the applicant’s case that would justify waiver of the parenting payment debt under section 1237AAD of the Act.
Decision
50. The decision under review is affirmed.
I certify that the 50 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Member
Signed: Sarah Oliver
AssociateDate of Hearing 12 June 2003 (at Gympie)
Date of Decision 4 July 2003The Applicant appeared in person
Solicitor for the Respondent Mr T Ffrench, Departmental Advocate
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