Petruschenko and Secretary, Department of Social Services (Social services second review) - [2020] AATA 4684

Petruschenko and Secretary, Department of Social Services (Social services second review) [2020] AATA 4684 (24 November 2020)
Division:GENERAL DIVISION
File Number(s): 2019/6894
Re:Vladimir Petruschenko
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Member W Frost
Date:24 November 2020
Place:Canberra

The decision under review is affirmed pursuant to subsection 43(1)(a) of the Administrative Appeals Tribunal Act 1975.
............................................................
Member W Frost
Catchwords
SOCIAL SECURITY - Newstart Allowance – assets test - debt – failure to declare interest in real estate – whether debt should be written off or waived – financial hardship – special circumstances – can the value of assets be reduced - decision under review affirmed.
Legislation
Administrative Appeals Tribunal Act 1975 s 43
Social Security Act 1991 ss 11, 1118, 1131, 1223, 1236, 1237A, 1237AD
Social Security (Administration) Act 1999 ss 80, 179
Cases
Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25
Beadle and Director - General of Social Security (1984) 6 ALD 1
Brownsey and Secretary, Department of Social Services [2015] AATA 660
Cummins and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 513
Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114
Dranichnikov and Centrelink [2003] FCAFC 133
Evans and Secretary, Department of Social Security [1993] AATA 497
Feneley and Secretary, Department of Family and Community Services [2003] AATA 496
Groth and Secretary Department of Social Security (1995) FCA 1708
Henderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 468
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Klaverstyn and Secretary, Department of Family and Community Services [2003] AATA 71
Nosek and Secretary, Department of Social Services [2016] AATA 199
Pavilupillai and Secretary, Department of Employment and Workplace Relations [2007] AATA 1906
Quiggin and Secretary, Department of Social Services [2019] AATA 3324
Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Re Gerhardt and Department of Employment, Education and Training [1996] AAT 10941
Re Ivovic and Director General of Social Services (1981) 3 ALN N95
Re Jack and Woodhouse and Joyce Woodhouse and Secretary, Department of Social Security [1987] AATA 73
Re Lumsden and Secretary Department of Social Security [1986] AATA 228
Secretary, Department of Family and Community Services and Birgden [2003] AATA 67
Secretary, Department of Social Security v Coralie Hales [1998] FCA 219
Wall and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 740
Secondary Materials
Social Security Guide
REASONS FOR DECISION
Member W Frost
24 November 2020
INTRODUCTION

This decision concerns the alleged overpayment of more than $80,000 of the social security payment, Newstart Allowance (Newstart), and what should happen if there is such a debt. The Applicant, Mr Vladimir Petruschenko, was in receipt of Newstart for four distinct periods of time from December 2008 to December 2016. At all relevant times, the then Department of Human Services (now Services Australia and referred to in this decision as the Agency) was not informed by Mr Petruschenko of his interest in two pieces of real estate, that were not then his principal place of residence and therefore exempt from the applicable assets test for payment of Newstart. That is, Mr Petruschenko had two real estate properties that he did not declare while receiving Newstart for approximately five years and eight months.
In 2018, the Agency ceased Newstart payments to Mr Petruschenko and commenced action to recover the alleged debt amount of $81,901.57 (Debt). Mr Petruschenko disputed the Debt, but in 2019 an Authorised Review Officer (ARO) found the Agency’s decision was correct.
Mr Petruschenko applied for review by the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1). In September 2019, the AAT1 set aside the Agency’s decision and remitted it to the Agency with directions that Mr Petruschenko owed the Debt, but that it was to be written off for a period of 12 months from the date of the decision, after which Mr Petruschenko’s financial circumstances should be reviewed. Mr Petruschenko applied to the General Division of the Administrative Appeals Tribunal (Tribunal) for review of that decision.
The Tribunal considered all documents in two bundles filed in this proceeding by the Respondent on 25 November 2019 and 21 August 2020, pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (AAT Act).[1] The Tribunal also considered the following documents provided by Mr Petruschenko:
(a)Reply to Respondent’s Statement of Facts, Issues and Contentions dated 20 July 2020;[2]
(b)Undated Additional Reply Submissions filed with the Tribunal on 4 September 2020;[3]
(c)Statement dated 8 April 2020 (with attachments);[4]
(d)Extract from the Social Security Guide (Guide) titled ‘General Provisions for Hardship’ filed on 2 March 2020;[5]
(e)Document titled ‘Notes from Social Security Guide’ dated 26 February 2020;[6]
(f)Undated document titled ‘Certain assets to be disregarded in calculating the value of a person’s assets’ filed on 9 December 2019;[7]
(g)Document titled ‘AAT Second Review – Statement of Issues’ dated 28 November 2019 (with attachment);[8] and
(h)Document titled ‘Further information’ dated 13 August 2019 (with attachments).[9]
[1] Being Exhibits R1 and R2.
[2] Exhibit A1.
[3] Exhibit A2.
[4] Exhibit A3.
[5] Exhibit A4.
[6] Exhibit A5.
[7] Exhibit A6.
[8] Exhibit A7.
[9] Exhibit A8.
For the following reasons, the Tribunal has affirmed the AAT1 decision, meaning Mr Petruschenko’s application is unsuccessful and he owes the Debt to the Commonwealth.
ISSUES
The issues for determination by the Tribunal are whether:
(i)Mr Petruschenko has a Newstart Debt of $81,901.57 for the period from 5 December 2008 to 13 December 2016; and
(j)if so, all or part of the Debt should be written off or waived.
BACKGROUND
From 5 December 2008 to 6 May 2009 (a period of approximately 5 months), Mr Petruschenko received a total amount of $4,417 in Newstart,[10] following a claim he made on 16 December 2008.[11] In the ‘Customer Declaration Form’, which was initialled on each page (except the final page containing his signature), Mr Petruschenko stated that ‘I have no real estate interests other than the home in which I live’, being a property in the suburb of Duffy in the Australian Capital Territory (First Duffy Property).[12] This form contained handwritten amendments made by Mr Petruschenko in relation to his bank accounts. The customer declaration (Customer Declaration) at the end of the document and signed by Mr Petruschenko acknowledged, among other things, that:[13]
The claim form for Newstart Allowance has been read by me / to me and the information I have given in this claim form is complete and correct.
…
I understand that deliberately giving false or misleading information is a serious offence.
[10] Exhibit R1, T17, page 351.
[11] Exhibit R1, T4, pages 42-45.
[12] ibid., page 43.
[13] ibid., page 45.
From 11 June 2010 to 21 January 2011 (a period of approximately 7 months), Mr Petruschenko received a total amount of $7,623.49[14] in Newstart following a claim he made on 26 May 2010.[15] Mr Petruschenko again initialled each page of the ‘Customer Declaration Form’ (except the final page containing his signature) and declared that he did not have any real estate interests ‘other than the home in which I live’, listed as the First Duffy Property.[16] Mr Petruschenko made handwritten amendments in relation to his dependent child.[17] Mr Petruschenko also signed the Customer Declaration containing the same statement set out in the preceding paragraph.[18]
[14] Exhibit R1, T17, page 351.
[15] Exhibit R1, T5, pages 46-49.
[16] ibid., page 47.
[17] ibid, pages 46-47.
[18] ibid., page 49.
From 7 December 2011 to 19 November 2012 (a period of approximately 11 months), Mr Petruschenko received a total amount of $13,221.33[19] in Newstart following a claim he made on 6 December 2011.[20] Again, Mr Petruschenko initialled each page of the ‘Customer Declaration Form’ (except the final page containing his signature) and declared no real estate interests other than his principal home, listed as the First Duffy Property, although he made handwritten amendments in relation to a bank account.[21] Mr Petruschenko also signed the Customer Declaration regarding his claim being ‘complete and correct’ and understanding that providing false and misleading information is a serious offence.[22]
[19] Exhibit R1, T17, page 351.
[20] Exhibit R1, T6, pages 50-53.
[21] ibid., pages 51-52.
[22] ibid., page 53.
From 22 March 2013 to 13 December 2016 (a period of approximately 3 years and 9 months), Mr Petruschenko received a total amount of $56,639.62[23] in Newstart following a claim he made on 15 March 2013.[24] Mr Petruschenko initialled each page of the ‘Customer Declaration Form’ (except the final page containing his signature) and again declared that ‘I have no real estate interests other than the home in which I live’, which was the First Duffy Property.[25] Mr Petruschenko also signed the Customer Declaration that, among other things, the claim form was ‘complete and correct’ and he understood that ‘giving false and misleading information is a serious offence’.[26]
[23] Exhibit R1, T17, page 351.
[24] Exhibit R1, T7, pages 54-57.
[25] ibid., page 56.
[26] ibid., page 57.
On 29 November 2016, the Agency wrote to Mr Petruschenko requesting ‘more information to help us make the right decision about your Newstart Allowance’.[27] The letter continued: ‘Our records show that you have an investment property and you may be receiving rental income which is not recorded on your Centrelink record’. Mr Petruschenko was requested to provide information in a ‘Real estate details’ form provided by the Agency and any associated supporting documentation by 13 December 2016.
[27] Exhibit R1, T8, pages 58-59.
On 9 December 2016, Mr Petruschenko completed the ‘Real estate details’ form.[28] In this form, Mr Petruschenko wrote ‘3’ in response to the question: ‘How many properties in Australia and/or outside Australia did you (and/or your partner) own or have an interest in?’. The address listed by Mr Petruschenko was for a property in Bemboka, New South Wales (Bemboka Property). Mr Petruschenko stated that he purchased the Bemboka Property in May 1995 for the amount of $52,000, there was no mortgage or encumbrance over the property and he estimated its value at $160,000.[29] In July 2016, the Bega Valley Shire Council valued the land at the Bemboka Property at $125,000.[30] Mr Petruschenko did not provide any details of his third property in this form.
[28] Exhibit R1, T9, pages 60-65.
[29] ibid., pages 60-63.
[30] Exhibit R1, T11, pages 78-79.
On 14 December 2016, the Agency informed Mr Petruschenko that it had suspended his payment of Newstart.[31]
[31] Exhibit R1, T16, page 305.
On 13 March 2017, three months after his earlier declaration of the Bemboka Property, Mr Petruschenko completed a further ‘Real estate details’ form.[32] In this form, Mr Petruschenko again declared ownership or an interest in 3 properties and listed an address for a second property in the suburb of Duffy in the ACT (Second Duffy Property). Mr Petruschenko stated that he purchased the Second Duffy Property on 20 September 2003 for the amount of $225,000, its estimated value was $500,000 and his First Duffy Property (with an estimated market value of $530,000) was used as security for the Second Duffy Property.[33] In response to the question, ‘What type of property is this?’, Mr Petruschenko stated that ‘It was a house, but then got burnt down in Canberra Bush Fires was vacant land for 6 yrs’.[34] Mr Petruschenko said he owed $192,000 on the loan for the Second Duffy Property, said to be for the construction of a house and expenses, with approximately ‘85% finished’, but requiring a further $30,000 to complete.[35] The Tribunal notes that there was evidence before it that Mr Petruschenko had an interest in the Second Duffy Property around the time of the Canberra fires in January 2003, not from September 2003 being the date of purchase he listed in the ‘Real estate details’ form.[36] In this regard, Mr Petruschenko informed the Agency in October 2018 that he purchased the Second Duffy Property for $222,000 in November 2001.[37] Mr Petruschenko confirmed at the hearing that the Second Duffy Property was purchased on 19 November 2001, and not in 2003 as he had initially told the Agency.
[32] Exhibit R1, T10, pages 66-73.
[33] ibid., page 69.
[34] ibid., page 68.
[35] ibid., page 71.
[36] Exhibit R1, T11, page 77.
[37] Exhibit R1, T18, page 497.
On 6 November 2018, the Agency wrote to Mr Petruschenko regarding the Debt, as follows:[38]
Because of the value of your assets, due to your [Bemboka] property…and [the Second Duffy Property] (your [First Duffy Property] was an exempt asset), between 5 Dec 2008 – 13 Dec 2016, these payments were incorrect. This means that you have been overpaid $81901.57. We are, therefore, required to recover this amount.
[38] Exhibit R1, T12, pages 80-81.
On 12 June 2019, following Mr Petruschenko’s request for review of the Agency’s decision to raise and recover the Debt, an ARO affirmed that decision.[39]
[39] Exhibit R1, T14, pages 87-93.
On 17 June 2019, Mr Petruschenko applied for review of the ARO’s decision by the AAT1.[40]
[40] Exhibit R1, T15, pages 94-99.
On 25 September 2019, pursuant to section 43(1)(c) of the AAT Act, the AAT1 set aside the Agency’s decision to raise and recover the Debt and remitted the matter to the Agency for reconsideration in accordance with directions that:[41]
(a)Mr Petruschenko ‘owes a newstart allowance debt of $81,901.57 for the period 5 December 2008 to 13 December 2016’; and
(b)The Debt ‘is to be written off for a period of 12 months from the date of this decision, following which Mr Petruschenko’s financial circumstances should be reviewed’.
[41] Exhibit R1, T2, pages 3-9.
On 24 October 2019, Mr Petruschenko lodged with this Tribunal an application for review of the AAT1 decision, which stated that the reasons for seeking a further review were:[42]
Not in full agreement with some of the decisions; Needs further investigation / information
The debt amount is not accurate: needs to be clarified
In disagreement with the case not being accepted in category of special circumstances.
Need to seek Further advise [sic] on Social Security Act in relevance to this case; also an element of prejudice towards my case.
LEGISLATION & POLICY
[42] Exhibit R1, T1, pages 1-3.
Assets
Subsection 11(1) of the Social Security Act 1991 (Act) defines an ‘asset’ to mean ‘property or money (including property or money outside Australia)’ and ‘exempt assets’ to be ‘assets described in subsection 1118(1)’ of the Act.
Under subsection 1118(1)(a) of the Act, in calculating the value of a person’s assets where they are not a member of a couple, the value of ‘any right or interest of the person in the person’s principal home’, as defined by section 11A of the Act, is to be disregarded. That is, the ‘principal home’ is an exempt asset.
Subsection 11(12) of the Act provides that an asset of a person is ‘unrealisable’ if:
(a) the person cannot sell or realise the asset; and
(b) the person cannot use the asset as a security for borrowing.
Newstart
Section 643 of the Act provides that a person’s rate of Newstart is to be worked out using ‘Benefit Rate Calculator B at the end of section 1068’. This provides a ‘Method statement’ for working out a person's daily rate of Newstart. Step 5 in section 1068-A1 requires the application of the ‘income test’ using ‘Module G’, set out at 1068-G1 in the Act, to identify the person’s ‘maximum payment rate’ for Newstart.
Subsection 611(1) of the Act provides that Newstart is not payable to a person if the value of the person’s assets is more than their ‘assets value limit’. The Table at subsection 611(2) lists the ‘assets value limit’ for a person who is a homeowner but not a member of a couple as being $110,750. However, Note 5 to this subsection states that the amount is ‘indexed annually in line with CPI [Consumer Price Index] increases’. Accordingly, as set out in the relevant ‘Guide to Australian Government Payments’, the assets value limit at the time Mr Petruschenko applied for Newstart in December 2008 was $171,750 and was $202,000 when these payments were suspended in December 2016.[43]
[43] Exhibit R2, ST1, page 561; ST2, page 599.
Subsection 608(1) of the Act provides that Newstart is not payable to a person if the person’s Newstart rate would be nil.
Subsection 1121(1) of the Act allows, for the purpose of calculating the value of a person’s assets, for the value of an asset to be reduced by the value of any charge or encumbrance over that asset. Subsection 1121(3) states that this reduction does not apply to a charge or encumbrance over assets that are to be disregarded under section 1118 of the Act, relevantly, the principal home of a person.
Suspension of Newstart
Subsection 80(1) of the Social Security (Administration) Act 1999 (Administration Act) provides that a social security payment is to be cancelled or suspended if the Respondent is satisfied that the payment is being, or has been, paid to a person who is not, or was not, qualified for the payment.
Creation of the Debt
Subsection 1223(1) of the Act provides that 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.
Writing off the Debt
Section 1236 of the Act relevantly provides that:
(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.
(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.
(1B) For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(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.
(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.
…
Waiving the Debt
Administrative error
Subsection 1237A(1) of the Act relevantly provides that the Respondent ‘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’.
Special circumstances

Section 1237AAD of the Act states that the Respondent may 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; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
Hardship
Section 1131 of the Act, in relation to access to financial hardship rules, relevantly provides that:
(1) If:
(a) a social security benefit is not payable to a person because of the application of an assets test; and
(b) the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and
…
(e) the person, or the person’s partner, has an unrealisable asset; and
(f) the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(g) the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;
the Secretary must determine that this section applies to the person.
Note: For unrealisable asset see subsections 11(12) and (13).
…
(3) A decision under subsection (1) takes effect:
(a) on the day on which the request under paragraph (1)(f) was lodged with the Department; or
(b) if the Secretary so decides in the special circumstances of the case—on a day not more than 6 months before the day on which the request under paragraph (1)(f) was lodged with the Department. [emphasis in original]
Subsection 1132(1) of the Act, regarding the application of the financial hardship rules, relevantly provides that:
If section 1131 applies to a person, the value of:
(a) any unrealisable asset of the person; and
(b) any unrealisable asset of the person’s partner;
is to be disregarded in working out whether a social security benefit is payable to the person.
Social Security Guide
The Tribunal notes that, although government policy is not binding, it will ordinarily be followed unless there is a cogent reason not to do so.[44] The relevant policy in relation to Newstart is contained in the Guide and the Tribunal is not aware of any cogent reason for not following the terms of the Guide.
[44] Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634.
In relation to the rationale for hardship provisions, clause 4.6.7.10 of the Guide states as follows:
The assets test presumes pension and benefit recipients with substantial assets (1.1.A.290), apart from their principal home, use those assets to produce income for their own support. If substantial assets are held, but they produce little or no income, a person is expected to rearrange their financial affairs before calling on the community for income support through the social security system.
Sometimes a pension or benefit recipient is unable, or in the case of a pensioner could NOT reasonably be expected, to rearrange their financial affairs. Hardship provisions may mean that these people are able to have certain assets disregarded when calculating their pension or benefit rate. Assets which are disregarded for hardship purposes are called 'unrealisable assets' in the SSAct.
In relation to the valuation of assets, clause 4.6.6.10 of the Guide states that:
Assets are generally assessed at their net market value (1.1.M.40). The net market value is the amount a person would expect to receive if they sold the asset on the open market, less any valid debts or encumbrances (1.1.E.108).
…
For some assets a valuation is required. Valuations are completed by a professionally qualified valuer appointed by Centrelink. For ALL other assets, the person's estimate is accepted as reasonable UNLESS it appears that the value has been understated AND the value is likely to affect the person's payment.
Clause 1.1.M.40 of the Guide defines ‘market value’ to be ‘the point at which a willing purchaser and a willing, but NOT anxious vendor, would reach agreement’.
Tribunal’s jurisdiction
For completeness, the Tribunal notes that, under section 179 of the Administration Act, an application may be made to the Tribunal for review of a decision of the AAT1 made under subsection 43(1) of the AAT Act.
Subsection 43(1) of the AAT Act provides that:
For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:
(a) affirming the decision under review;
(b) varying the decision under review; or
(c) setting aside the decision under review and:
(i) making a decision in substitution for the decision so set aside; or
(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.
As previously mentioned in this decision, the AAT1 made a decision pursuant to subsection 43(1)(c) of the AAT Act. This Tribunal therefore has jurisdiction in relation to Mr Petruschenko’s application for review of the AAT1 decision.
MR PETRUSCHENKO’S SUBMISSIONS AND EVIDENCE
Written submissions
As previously detailed in these reasons, Mr Petruschenko provided this Tribunal with numerous documents in support of his application.[45] Mr Petruschenko essentially made the following contentions:
[45] Exhibits A1-A8.
(a)If the Second Duffy Property was exempted as an asset, he would fall under the asset value limit and there would be no Debt;[46]
(b)Australians should not be penalised and disadvantaged because their property burnt down in a natural disaster. In this regard, two of Mr Petruschenko’s houses razed by fire were taken away from him (the Second Duffy Property in 2003 and the Bemboka Property in 2019) and he should be given the chance to rebuild and repair his life and not be forced to sell the properties;[47]
(c)The Respondent and, by virtue of his application before it, the Tribunal, should afford Mr Petruschenko, as a victim of the 2003 and 2019 fires, leniency, compassion, understanding and support given his losses. To this end, it is unreasonable and insensitive to expect Mr Petruschenko to re-arrange his financial affairs and sell fire-affected property;[48]
(d)After the 2003 Canberra fires, Mr Petruschenko committed to rebuilding the Second Duffy Property, there was an economic downturn, he was unemployed and went to Centrelink for assistance until re-employed. Mr Petruschenko submitted that it is unreasonable to say that he could sell the property when he was in the middle of the recovery process. This would mean forcing Mr Petruschenko to lose all his work and effort towards recovery, which is ‘very unfair’;[49]
(e)If it were not for the fire, Mr Petruschenko would not have needed Centrelink’s assistance. The Second Duffy Property was ‘an important income producing asset’. The fire changed Mr Petruschenko’s life and the Second Duffy Property containing a house that was destroyed in 2003 should be exempt from being counted as an asset or have its asset value amount reduced. In this regard, Mr Petruschenko acknowledged that the Second Duffy Property and the Bemboka Property are over the asset value limit, although this amount is ‘minor’. Additionally, Mr Petruschenko asserted that if the ‘deductions associated with rebuilding the Second Duffy Property are taken into account, then it would be under the asset limit’;[50]
(f)Mr Petruschenko contended that, pursuant to subsection 11(12) of the Act, he ‘cannot sell or realise the asset’ and it is therefore an ‘unrealisable asset’ because, in 2008 when he first applied for Newstart, he had already started to rebuild the house at the Second Duffy Property, so selling it would be ‘very difficult, and unreasonable’. To this end, Mr Petruschenko submitted that the hardship provisions in the Guide were applicable in that he ‘could not reasonably be expected to rearrange’ his financial affairs and should ‘have certain assets disregarded’ when calculating his Newstart rate;[51]
(g)Mr Petruschenko said the evidence of his inability to rearrange his financial affairs, in addition to the unreasonableness of selling the Second Duffy Property during reconstruction, was the ‘suffering and difficulty added to my life’ from a serious physical assault in 2011 and an accident following falling from a ladder. Following the assault, Mr Petruschenko said he was suffering from ‘a deep depression’, a lack of sleep, living in fear and unable to properly function;[52]
(h)There were ‘elements of human error and misunderstanding’ in Mr Petruschenko’s dealing with Centrelink, but he asserted that the Second Duffy Property was ‘most definitely mentioned at my original Centrelink interview’; it was ‘not withheld’. Mr Petruschenko said he could not recall ‘every detail’ about the initial interview, but considered that he had explained his situation and remembers attending counselling sessions that were arranged for him. At subsequent meetings when again applying for Newstart, Mr Petruschenko said he confirmed that there were no changes to his circumstances and signed the relevant forms. Mr Petruschenko conceded that it was his mistake in not checking the forms, but he was not made aware of an asset value limit for Newstart;[53]
(i)Mr Petruschenko said he was experiencing a period of ‘instability’, being depressed and ‘at times feeling suicidal’, therefore expecting him to understand the Act ‘is a harsh and unreal expectation’;[54] and
(j)Mr Petruschenko said he ‘never set out to deliberately take advantage of Centrelink’ and was ‘actively trying to find employment’ during the periods he was on Newstart. The 2003 Canberra fires had a ‘huge impact’ on his life, including the dissolution of his marriage and he was subsequently assaulted, which was ‘another extremely difficult situation to deal with’.[55]
[46] Exhibit A1.
[47] ibid.
[48] ibid.
[49] ibid.
[50] ibid.
[51] ibid.
[52] Exhibits A1 and A2.
[53] Exhibit A1.
[54] ibid.
[55] ibid.
Oral submissions
In Mr Petruschenko’s oral submissions at the hearing, he told the Tribunal that he had not intentionally sought to be paid Newstart when he was ineligible and ‘one thing led to another’; when he first went to Centrelink it was a ‘difficult time’ for him in 2008, he did not seek to create any fraud; he is known as a decent and hardworking person. Mr Petruschenko again contended that he did not realise that there was an assets value limit that applied to Newstart; he thought that Centrelink provided money to the unemployed to assist them to find a job.
Mr Petruschenko said that the Second Duffy Property had ‘gone up in flames’ in 1 hour during the 2003 Canberra fires. Mr Petruschenko was hurt and in a ‘hole’; his family had also broken apart during this stressful time.
Mr Petruschenko contended that special circumstances applied to his situation because of the 2003 fires and the Second Duffy Property should be considered an exempt asset in relation to the assets value limit for Newstart. At the time, Mr Petruschenko considered the Second Duffy Property was ‘worth very little’. If this was the case, Mr Petruschenko submitted, only his Bemboka Property would be captured by the assets test and this property was also worth ‘very little’, such that he would be below the relevant assets test limit and qualify for Newstart.
Mr Petruschenko informed the Tribunal that he had sought employment while receiving Newstart, however there had been other circumstances that had contributed to his current situation, such as being retrenched, a severe assault on him in 2011 which had ‘almost killed’ him, an inability to sleep and function, his construction work on the Second Duffy Property, renting the First Duffy Property and a ladder fall that resulted in a rotator cuff injury, surgery and a lengthy rehabilitation.
Upon questioning from the Tribunal about the status of the Second Duffy Property, Mr Petruschenko said that it was now 90% complete, as opposed to 85% as he stated in his ‘Real estate details’ form disclosing ownership of that property to the Agency in March 2017.
Mr Petruschenko said it was his ‘life plan’ to keep the Second Duffy Property for his daughter. Additionally, around the time of the recent Summer fires on the NSW South Coast, Mr Petruschenko had been living at the Bemboka Property, so as to earn rental income from the Second Duffy Property, before the former was destroyed in those fires.
Mr Petruschenko further told the Tribunal that the Second Duffy Property should be exempt from the assets value limit, and any consideration of his eligibility for Newstart, due to the hardship provisions that are applicable in his circumstances. In this regard, Mr Petruschenko sought for the Debt to be written off or waived by the Tribunal.
Cross-examination
By way of cross-examination at the hearing, Mr Petruschenko was referred to the file notes from a conversation he had with an officer of the Agency on 29 November 2016, which record that:[56]
Customer will need to submit Mod-R, undisclosed property. Cus stated the property is costing him money so he did not declare it, cust stated property is worth about $150,000, have advised Cust he may need to repay any overpayments related to re assessment of benefit. Have advised him of his obligations also. Customer will call back DHS.
[56] Exhibit R1, T18, page 496.
Mr Petruschenko recalled this conversation, but denied that he had chosen not to declare the Bemboka Property, he said he was explaining that it was costing him money to keep that property; it was not making him money. Mr Petruschenko confirmed that he only discussed the Bemboka Property and not also the Second Duffy Property because the Agency only asked him about the Bemboka Property on the telephone call of November 2016. The Agency sent Mr Petruschenko a ‘Real estate details’ form to complete regarding his real estate, which he did but only provided details of the Bemboka Property.
Mr Petruschenko said that he received a further telephone call from the Agency regarding the undisclosed Second Duffy Property, after which he completed another ‘Real estate details’ form for the Agency, some three months after first disclosing his ownership of the Bemboka Property.
Mr Petruschenko was taken to his first claim form for Newstart that he completed on 16 December 2008. Mr Petruschenko agreed that he had made the handwritten annotations on the ‘Customer Declaration Form’, but disagreed with the proposition that he had looked through this document and answered it to the best of his ability. Mr Petruschenko said that he explained his situation to the Centrelink officer; while he signed the final page and initialled every other page he did not go through all of the document. Mr Petruschenko acknowledged that this was his ‘mistake’ and said it was due to his depression and his then situation. Mr Petruschenko said that ‘they told me to sign’ the document. Upon further questioning, Mr Petruschenko agreed that he read the document and made changes where there was an error, but did not recall reading through the list of items that contained the section on real estate and asked him to declare whether he had any real estate interests other than his principal home.
Mr Petruschenko was taken to each of his three further claim forms for Newstart, being the Customer Declaration Form, completed in May 2010, December 2011 and March 2013. Mr Petruschenko confirmed that he had signed each of these documents and made handwritten annotations to some of them where he identified an error.
Mr Petruschenko told the Tribunal that his primary residence is now the Second Duffy Property; he also still owns the First Duffy Property, for which he receives $520 per week in rental income, together with retaining ownership of the Bemboka Property. Mr Petruschenko acknowledged that he was not legally incapable of selling or disposing any of these three properties, but questioned whether it was ‘reasonable’ for him to sell them. In this regard, Mr Petruschenko said that the Bemboka Property had been ‘burnt to the ground’ in the recent Summer bushfires and the Second Duffy Property was being kept as a property for his daughter. To this end, Mr Petruschenko said it was ‘not that easy’ to sell off the properties and they were part of a ‘very careful life plan’.
Both the Agency and Mr Petruschenko confirmed that the Agency had not commenced any repayment or recovery action in relation to the Debt, following the end of the 12 month period that the Debt had been written off pursuant to the AAT1 decision on 25 September 2019.
CONSIDERATION
What is the value of Mr Petruschenko’s assessable assets?
During the period of the alleged Debt, from December 2008 to December 2016, the First Duffy Property was Mr Petruschenko’s ‘principal home’ and, pursuant to subsection 1118(1) of the Act, exempt from any calculation of the value of his assets for the purpose of determining his payment rate for Newstart. However, during this time, Mr Petruschenko owned two additional properties, the Second Duffy Property and the Bemboka Property. These properties are not ‘exempt assets’ under the Act and must be assessed for the purposes of any Newstart claim.
Despite this, neither the Second Duffy Property nor the Bemboka Property were taken into account in assessing the value of Mr Petruschenko’s assets when considering each of his four Newstart claims that were made in 2008, 2010, 2011 and 2013. Accordingly, between 2008 and 2016, the value of Mr Petruschenko’s assets was assessed as being below the applicable asset value limit, which ranged from $171,750 in 2008 to $202,000 in 2016, and he was therefore determined to be eligible for, and was paid, Newstart after each of those four claims. The total amount of these Newstart payments was $81,901.57, being the alleged Debt amount.
The Act does not specify how a person’s assets are to be valued for the assets test in Module G of the Act. However, the Guide, the Tribunal and the Federal Court of Australia have addressed the issue on numerous occasions and the approach is settled.[57] The Guide states that assets are generally assessed at their net market value, which is the point at which a willing purchaser and a willing, but not anxious vendor, would reach agreement.[58]
[57] Re Jack and Woodhouse and Joyce Woodhouse and Secretary, Department of Social Security [1987] AATA 73; Evans and Secretary, Department of Social Security [1993] AATA 497; Henderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 468; Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790; Cummins and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 513 at [23]-[24]; Brownsey and Secretary, Department of Social Services [2015] AATA 660 and Nosek and Secretary, Department of Social Services [2016] AATA 199.
[58] At Instruction 4.6.6.10 and 1.1.M.40.
In accordance with the authorities and the Guide, the value of a property is generally determined using the market value. Despite this principle, the Agency assessed both the Bemboka Property and the Second Duffy Property using only the information provided to it by Mr Petruschenko.[59] That is, the Agency did not request or seek to have an independent assessment undertaken to determine the market value of these two properties to inform its calculation of the value of his assessable assets. The assessment by the Agency of the value of these two assets was based solely on Mr Petruschenko’s assessment of their value.
[59] Exhibit R1, T18, pages 496-498.
Accordingly, for the purposes of determining the total value of Mr Petruschenko’s assessable assets to determine his eligibility for Newstart, the Bemboka Property was valued by the Agency as follows:[60]
(a)$44,250 from June 1998 to July 2015, being the purchase price for the property;
(b)$125,000 from July 2015 to December 2016; and
(c)$160,000 from December 2016 onwards.
[60] Exhibit R1,T9, page 61; T18 page 497.

In addition, the Second Duffy Property was valued by the Agency as follows:[61]
(a)$160,000 from January 2003 to December 2016; and
(b)$500,000 from December 2016 to May 2018.
[61] Exhibit R1, T18, pages 496-498; T10, page 69.
In the absence of any other available evidence, including an independent historical assessment of the properties’ market value, the Tribunal adopts the assessment of the value of both the Bemboka Property and the Second Duffy Property for the relevant periods of time set out in the immediately preceding paragraphs in these reasons.
Does Mr Petruschenko have a Newstart Debt?
Mr Petruschenko first applied for Newstart in December 2008. At that time, the assets value limit for a single homeowner, such as Mr Petruschenko, was $171,750. The total assessed value of the Bemboka Property and the Second Duffy Property in December 2008 was $204,250. That is, the combined value of these two assets alone exceeded the applicable assets value cut off limit from the first payment of Newstart Mr Petruschenko received in December 2008. Mr Petruschenko received total payments during the period from 5 December 2008 to 6 May 2009 in the amount of $4,417.13.[62]
[62] Exhibit R1, T17, pages 308-309, page 351.
In 2010, when Mr Petruschenko next applied for Newstart, the assets value limit was $178,000. The total assessed value of the Bemboka Property and the Second Duffy Property in 2010 remained $204,250, that is, above the limit for the payment of Newstart. Mr Petruschenko received total payments during the period from 11 June 2010 to 21 January 2011 in the amount of $7,623.49.[63]
[63] ibid.
In 2011, at the time of Mr Petruschenko’s third application for Newstart, the assets value limit was $186,750. The total assessed value of the Bemboka Property and the Second Duffy Property in 2011 remained $204,250, that is, above the limit for the payment of Newstart. Mr Petruschenko received total payments during the period from 7 December 2011 to 19 November 2012 in the amount of $13,221.33.[64]
[64] ibid.
In 2013, when Mr Petruschenko made his fourth and final application for Newstart, the assets value limit was $192,500 and rose to $202,000 in July 2015. The total assessed value of the Bemboka Property and the Second Duffy Property in 2013 was $285,000, that is, it was above the limit for the payment of Newstart at all relevant times. Mr Petruschenko received total payments during the period from 22 March 2013 to 13 December 2016 in the amount of $56,639.62.[65]
[65] ibid.
From the above analysis, it is evident that Mr Petruschenko’s assessable assets were always above the applicable assets value limit and he was therefore ineligible to receive Newstart at all times during the relevant period between 2008 and 2016 that he received those payments. Mr Petruschenko’s ineligibility for Newstart is plain from a consideration of the value of his two assessable real property assets and does not account for any other assessable assets he held during the applicable period, including the value of other assets and ‘investments’ listed in his various Newstart application forms throughout the period from 2008 to 2013. In this regard, during the relevant period, the value of Mr Petruschenko’s assets were always over the assets value limit and he was therefore always ineligible for Newstart.
Between 18 December 2008 and 14 December 2016, the Agency sent Mr Petruschenko numerous notices regarding his obligations to report changes to his assets to the Agency.[66] Mr Petruschenko did not declare the Bemboka Property or the Second Duffy Property in his four applications to the Agency for Newstart made in 2008, 2010, 2011 and 2013. As a result, each of Mr Petruschenko’s four Newstart claims were granted by the Agency when he was not entitled to Newstart because the value of his assets were over the relevant assets test.
[66] Exhibit R1, T16, pages 104-307.
During the relevant periods from 5 December 2008 to 13 December 2016, the total amount of Newstart payments received by Mr Petruschenko was $81,901.57.[67] Pursuant to subsection 1223(1) of the Act, the Tribunal finds that a social security payment was made to Mr Petruschenko, he was not entitled for any reason to obtain that benefit and the total amount of the payment is a debt due to the Commonwealth.
[67] Exhibit R1, T17, pages 308-309, page 351.
Should the Debt be recovered?
Mr Petruschenko is currently not receiving any social security payments and is yet to commence repayment of the Debt.
In Secretary, Department of Social Security v Coralie Hales,[68] Justice French espoused the principle that the Australian community or ‘taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned’. The Act accordingly provides for writing off and the waiver of debts otherwise due to the Commonwealth.
[68] [1998] FCA 219.
Should the Debt be written off?
Section 1236 of the Act provides that the Respondent, or here the Tribunal, may on behalf of the Commonwealth decide to write off a debt for a period of time. However, a debt may only be written off if the debt is irrecoverable at law, the debtor has no capacity to repay the debt, the debtor’s whereabouts are unknown or it is not cost effective for the Commonwealth to pursue action to recover the debt. Subsection 1236(1B) of the Act sets out the circumstances when a debt is irrecoverable at law. These are inapplicable in this proceeding.
Subsection 1236(1C) of the Act relevantly provides that if a debt is recoverable by means of deductions from a debtor’s social security payment, the person is taken to have a capacity to repay the debt unless recovery by those means would result in the person being in ‘severe financial hardship’. The meaning of ‘severe financial hardship’ has been considered in a number of Tribunal decisions.[69] In Feneley and Secretary, Department of Family and Community Services,[70] the Tribunal stated that:
the meaning of the term, while not implying destitution goes beyond straightened financial circumstances and imports a need for the particular circumstances of a person to include suffering of a severe or extreme nature.
[69] Re Lumsden and Secretary Department of Social Security [1986] AATA 228; Secretary, Department of Family and Community Services and Birgden [2003] AATA 67 and Klaverstyn and Secretary, Department of Family and Community Services [2003] AATA 71.
[70] [2003] AATA 496 at [36].
As previously mentioned in these reasons, Mr Petruschenko is currently not in receipt of any social security payments. The AAT1 found that Mr Petruschenko owes the Debt, but that it was appropriate in the circumstances to write off the Debt for a period of 12 months from the date of its decision on 25 September 2019.[71] This 12 month period has now expired and the Respondent has not taken any steps to recover the Debt.
[71] Exhibit R1, T2, pages 8-9.
The Tribunal is not satisfied that there are grounds to write off the Debt for a further period of time. In this regard, the Tribunal finds that the Debt cannot be written-off under section 1236 of the Act because the Debt is not irrecoverable at law; Mr Petruschenko has capacity to repay the Debt, including because he is the owner of two properties in addition to his principal home and the Bemboka Property is unencumbered; Mr Petruschenko has previously been able to unlock equity in the First Duffy Property, which was his principal home until May 2018; Mr Petruschenko is currently earning rental income of more than $500 per week from his First Duffy Property, equating to $26,000 per annum; and repayment of the Debt would not result in Mr Petruschenko experiencing severe financial hardship.
Can the Debt be waived?
Administrative error
Under section 1237A of the Act, the Respondent, or here the Tribunal, must waive the right to recover a debt that is ‘attributable solely to an administrative error made by the Commonwealth’ if the debtor received the payments the subject of the debt in good faith.
In Re Gerhardt and Department of Employment, Education and Training,[72] the Tribunal stated that the word ‘solely’ was to be given its ordinary meaning, being ‘exclusively,’ ‘only’ and ‘to the exclusion of all else.’ To this end, the duty to waive a debt does not extend to those debts attributable to errors or other factors independent of any administrative error made by the Commonwealth.
[72] [1996] AAT 10941.
The Tribunal finds that the Debt cannot be waived under section 1237A of the Act because there is no administrative error attributable solely to the Commonwealth. Mr Petruschenko did not inform the Agency that he had any real estate interest other than his principal home in each of his four Newstart applications over 5 years from 2008. During this period, Mr Petruschenko was issued multiple notices by the Agency containing the definition of an asset and requiring him to notify the Agency of changes to his assets,[73] which he did not do until in 2016 when the Agency enquired with him about undeclared assets.[74] In this regard, while Mr Petruschenko advised the Agency of the Bemboka Property in December 2016,[75] he did not advise it of the details of his interest in the Second Duffy Property until three months later in March 2017.[76] As a result, Mr Petruschenko’s failure to correctly inform the Agency of the totality of his assets since 2008 contributed to the Debt. For these reasons, the Tribunal is not satisfied that the Debt is attributable solely to the Commonwealth’s administrative error and it therefore cannot be waived under section 1237A of the Act.
Special circumstances
[73] See, for example, Exhibit R1, T16, page 280.
[74] Exhibit R1, T8, page 58.
[75] Exhibit R1, T9, pages 60-65.
[76] Exhibit R1, T9, pages 68-73.
Pursuant to section 1237AAD of the Act, the Respondent, or here the Tribunal, may waive the right to recover all or part of a debt if satisfied that it did not result from the debtor ‘knowingly’ making a false statement or ‘failing or omitting to comply’ with a provision of the social security legislative framework and there are ‘special circumstances (other than financial hardship alone) that make it desirable to waive’ and it is ‘more appropriate to waive than to write off the debt or part of the debt’.
The term ‘knowingly’ in relation to the making of a false statement is not defined in the Act, however the Tribunal’s decision of Re Callaghan and Secretary, Department of Social Security[77] states that the word ‘knowingly’ under section 1237AAD of the Act means that ‘a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act’. The identification of actual knowledge is to be determined by reference to the person’s statements as to ‘his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission’. In Wall and Secretary, Department of Education, Employment and Workplace Relations (Wall)[78] the Tribunal relevantly stated that:
In Taylor’s Central Garages (Exeter) Ltd v Roper [1951] WN 383 at 385, Devlin J considered the meaning of “knowledge” and found that actual knowledge can be inferred from the evidence and the nature of the acts done. Further, in RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123 at 126, the Court of Appeal in the Supreme Court of New South Wales said:
“In inferring knowledge, a court is entitled to approach the matter in two stages; where opportunities for knowledge on the part of the particular person are proved and there is nothing to indicate that there are obstacles to the particular person acquiring the relevant knowledge, there is some evidence from which the court can conclude that such a person has the knowledge. However, this conclusion may be easily overturned by a denial on his part of the knowledge which the court accepts, or by a demonstration that he is properly excused from giving evidence of his actual knowledge.”
Following the decision in RCA Corporation, it is open to the Tribunal to infer that a person had actual knowledge of their obligations under the Act where there were opportunities for them to gain that knowledge and where there were no obstacles to them acquiring the knowledge. In the present case, the respondent sent letters to the applicant notifying him of his obligations under the Act. However, there may well have been obstacles that would have prevented Mr Wall from being alert enough to understand his obligations under the Act. Those obstacles were his inebriated state at the time of the overpayments. I am satisfied that, as a result of his inebriation, certainly in respect of the overpayments between July 2003 and late 2005/early 2006, Mr Wall’s ability to comprehend his obligations and responsibilities under the Act was reduced. Accordingly, I am satisfied that he did not knowingly fail to comply with his obligations under the Act and s 1237AAD can apply.
[77] (1996) 45 ALD 435 at [48].
[78] [2010] AATA 740 at [28]-[29].
The meaning of ‘special circumstances’ was considered by the Tribunal in Beadle and Director - General of Social Security[79] to mean circumstances that are ‘unusual, uncommon or exceptional’. Although the circumstances need not be unique, they ‘must have a particular quality of unusualness that permits them to be described as special’. In this regard, the Tribunal in Davy and Secretary Department of Employment and Workplace Relations,[80] stated that the provision ‘necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system’. Furthermore, in Dranichnikov and Centrelink,[81] the Full Federal Court of Australia stated that ‘[t]o some extent the question whether there were special circumstances must depend on how it came about that the error occurred’.[82]
[79] (1984) 6 ALD 1 at [12].
[80] [2007] AATA 1,114 at [80].
[81] [2003] FCAFC 133 at [66].
[82] The Tribunal has considered ‘special circumstances’ in numerous other proceedings, including: Groth and Secretary Department of Social Security (1995) FCA 1708; Re Ivovic and Director General of Social Services (1981) 3 ALN N95; and Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25.
The Tribunal is not satisfied that the right to recover Mr Petruschenko’s Debt should be waived pursuant to section 1237AAD of the Act. In this regard, the Tribunal finds that Mr Petruschenko knowingly made false statements in each of his four successful claims for Newstart. In each of those claim forms, Mr Petruschenko stated that he did not have any real estate interests ‘other than the home in which I live’. Additionally, on the first three of his four Newstart claim forms, from 2008, 2010 and 2011, Mr Petruschenko made hand written amendments to correct information, such as his bank account details and number of dependent children, but did not correct the real estate details section in the forms. Mr Petruschenko also signed the Customer Declaration for each of his Newstart claims over a period of five years which contained an acknowledgement that the claim form had been either read by or to him and the information was complete and correct, in addition to confirming his understanding that giving false or misleading information is a serious offence. Furthermore, the Agency’s file notes from November 2016 record that Mr Petruschenko told the Agency that he did not declare the Bemboka Property any earlier because it was costing him money.[83]
[83] Exhibit R1, T18, page 496.
To this end, when Mr Petruschenko was put on notice in November 2016 that he had not declared all of his assets and was required to provide further information to the Agency, he still did not declare the details of the Second Duffy Property until three months later. Moreover, despite being sent numerous letters over many years that referred to his obligations to advise of changes in his circumstances and provided directions on ‘What are Assets’, which included real estate, Mr Petruschenko failed to advise the Agency of all of his assets.[84]
[84] Exhibit R1, T16, page 280.
Despite Mr Petruschenko not being able to recall ‘every detail’ of his initial interview with the Agency before he began receiving Newstart, he was adamant that he had at that time told the Agency of the Second Duffy Property. Even if the Tribunal accepts Mr Petruschenko’s evidence on this matter, and the contemporaneous evidence from this time does not support this proposition, despite numerous unimpeded opportunities, between 2008 and 2016 Mr Petruschenko did not disclose or seek to confirm his total real estate interests and it was not until 2017 that he informed the Agency of the Bemboka Property.
Applying the principle enunciated in Wall, the Tribunal finds that Mr Petruschenko had actual knowledge of his obligations under the Act because of the multiple opportunities for him to acquire that knowledge, including because he made four successful claims for Newstart over a period of five years, of which the forms contained a specific question about real estate interests other than the principal home. Mr Petruschenko was sent multiple letters by the Agency containing information about his ongoing reporting obligations under the Act, such as in relation to all of his assets. From 2008 to 2016, Mr Petruschenko failed to disclose the Bemboka Property and from 2008 to 2017 he failed to disclose the Second Duffy Property. These are significant financial assets that were required to be disclosed to the Agency. Despite numerous opportunities between 2008 and 2016, Mr Petruschenko failed to do so. For these reasons, the Tribunal is satisfied that Mr Petruschenko knowingly made false statements to the Agency.
Because of this finding, a waiver of the Debt cannot be further considered under section 1237AAD of the Act. However, for completeness, the Tribunal turns to consider whether special circumstances exist in relation to his application.
The Tribunal is not satisfied that Mr Petruschenko’s circumstances are sufficiently ‘unusual, uncommon or exceptional’ or otherwise ‘special.’ While the Tribunal accepts that Mr Petruschenko suffered some physical, financial and emotional hardship over the period he was receiving Newstart, the Tribunal finds that he was in a significantly better financial position relative to other social security recipients, especially those requiring assistance through Newstart (or now ‘Jobkeeper’); Mr Petruschenko had significant financial assets he could have realised during this period, including two pieces of real estate that were not his principal home. In this regard, Mr Petruschenko is still in a position where he can realise either of these assets to repay the Debt.
Despite not being entitled to Newstart because of the amount of his assets, Mr Petruschenko enjoyed the financial benefit and assistance of Newstart in the relevant periods between 2008 and 2016. While Mr Petruschenko has outlined circumstances of hardship between this period[85] he was, for five years and eight months of this time, being assisted by the Commonwealth through the social security system.
[85] For example, Exhibits A1-A3; Exhibits A5-A8; Exhibit R1, T11, page 74; T13, page 82.
Mr Petruschenko undoubtedly experienced great misfortune in losing two of his three houses in separate fires; the Second Duffy Property in the 2003 Canberra fires and the Bemboka Property in the recent Summer bushfires on the South Coast of NSW. Other events were also experienced by Mr Petruschenko between 2008 and 2016, including a marriage breakdown, a serious physical assault in 2011 that is evidently still traumatic, a significant fall from a ladder that resulted in surgery and rehabilitation, and also retrenchment. As difficult as these events separately and cumulatively have been for Mr Petruschenko, they do not rise to the level of being sufficiently unusual, uncommon or exceptional to make it desirable to waive the Debt.

In relation to financial matters, it is clear from Mr Petruschenko’s own evidence that the present value of his assets significantly exceed the value of the Debt.[86] While the Tribunal understands that, given his efforts to accrue such property for his family, Mr Petruschenko does not want to sell one or more of his real property assets in order to repay the Debt, the prospective repayment arrangements in relation to the Debt are not a matter for the Tribunal to consider, aside from the consideration of any applicable special circumstances of which there are none in Mr Petruschenko’s case.
[86] Exhibit R1, T18, pages 496-498; T19, pages 522-542.
Mr Petruschenko had the benefit of recovery of the Debt being waived for one year pursuant to the AAT1 decision of 25 September 2019. In this regard, since the Agency’s initial decision in November 2018 to raise and recover the Debt, Mr Petruschenko has had an effective two year grace period before any recovery action commences. In total, Mr Petruschenko has had the Debt since his Newstart payments were stopped by the Agency in December 2016, being almost four years ago. In this way, and acknowledging the appeal processes available to Mr Petruschenko, he has nonetheless had significant opportunity to arrange his financial affairs before the commencement of any potential recovery of the Debt. In the circumstances, and for the preceding reasons, the Tribunal finds that the Commonwealth is owed the Debt and its recovery should not be waived pursuant to section 1237AAD of the Act.
Can the value of the assets be reduced?
Mr Petruschenko submitted that the value of his assets could be reduced to below the applicable threshold in the relevant period he accrued the Debt. However, there is no provision in the Act providing for the retrospective reduction of the value of an asset in determining a person’s qualification for a social security payment at the time they made such a claim. As previously discussed in these reasons, section 1118 of the Act provides for certain assets, such as a person’s principal home, to be disregarded in calculating the value of their assets. Section 1121 of the Act relevantly provides that if there is a charge or encumbrance over a particular asset, its value is to be reduced by the value of that charge or encumbrance in calculating the value of a person’s assets. However, subsection 1121(3) of the Act states that this reduction of the value of an asset does not apply to a charge or encumbrance over assets that are to be disregarded due to section 1118. That is, relevantly, the value of a charge or encumbrance over Mr Petruschenko’s principal home.
In this regard, because it was Mr Petruschenko’s principal home, the value of the First Duffy Property was disregarded in calculating the value of his assets to determine his qualification for Newstart. In 2011, Mr Petruschenko obtained a ‘Portfolio Loan’ of $250,000 from a financial institution.[87] Security for this loan was taken out over Mr Petruschenko’s First Duffy Property (being his principal home) in the form of a first priority registered real property mortgage.[88] Therefore, in circumstances where the value of Mr Petruschenko’s principal home, the First Duffy Property, has already been disregarded, the value of one of the previously undisclosed assets (the Second Duffy Property) cannot be reduced by the amount of a charge or encumbrance over that property because of the application of subsection 1121(3) of the Act.
[87] Exhibit R1, T11, page 76.
[88] Exhibit R1, T13, pages 83-86.
The Tribunal has previously considered whether the value of an encumbrance (usually a mortgage) that is secured over a principal place of residence could be applied to reduce the value of another property. In Pavilupillai and Secretary, Department of Employment and Workplace Relations[89] the Tribunal reviewed decisions on this issue and found that:
…the mortgage over the Applicant's principal residence cannot be taken into account when determining the value of the property at Gower Street. The legislation is unequivocal in this regard, and the Tribunal's conclusion in this case is consistent with previous determinations of the Tribunal in like circumstances…
[89] [2007] AATA 1906 at [26].
For these reasons, the Tribunal finds that the value of one or more of Mr Petruschenko’s previously undisclosed assets cannot be reduced to put him below the applicable assets value limit for the determination of his qualification for Newstart to therefore eradicate the Debt. The Tribunal has found that Mr Petruschenko owes the Debt to the Commonwealth.
Can Mr Petruschenko rely on the hardship rules?
Section 1131 of the Act sets out when a person can access the financial hardship rules. That provision relevantly provides that the rules must be determined as applying to a person where that person has an ‘unrealisable asset’ and ‘lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person’ and the Respondent is satisfied that the person would suffer financial hardship if the section did not apply to them.
As previously set out in these reasons, subsection 1132(1) of the Act, regarding the application of the financial hardship rules, relevantly provides that:
If section 1131 applies to a person, the value of:
(a) any unrealisable asset of the person; and
(b) any unrealisable asset of the person’s partner;
is to be disregarded in working out whether a social security benefit is payable to the person.
Mr Petruschenko sought to rely on the hardship rules contained in the Act so that the Second Duffy Property and the Bemboka Property were classed as ‘unrealisable assets’ and were therefore to be disregarded in determining his entitlement to Newstart. Pursuant to subsection 11(12) of the Act, an asset of a person is an ‘unrealisable asset’ if the person cannot sell or realise the asset and cannot use the asset as a security for borrowing.
The Tribunal is not satisfied that the financial hardship rules apply in relation to Mr Petruschenko’s circumstances. There is no evidence that Mr Petruschenko lodged with the Department, in a form approved by the Secretary, a request that the financial hardship rules apply to him as required by section 1131 of the Act. Moreover, there is no statutory basis for retrospectively granting a person access to the financial hardship rules.[90]
[90] Quiggin and Secretary, Department of Social Services [2019] AATA 3324 at [24].
For completeness, the Tribunal finds that even if Mr Petruschenko had applied for access to the hardship rules at the relevant time, neither of the Second Duffy Property nor the Bemboka Property were an ‘unrealisable asset’ during the relevant debt period. While these assets produced no income during the relevant debt period, there is no evidence that Mr Petruschenko was unable to arrange his financial affairs so as to sell those assets. That is, in agreement with the AAT1’s findings, the Tribunal finds that there was and remains no practical impediment to either of these properties being sold.[91]
[91] Exhibit R1, T2, page 6.
In addition, clause 4.6.7.10 of the Guide states that the assets test presumes that people with substantial assets, apart from their principal home, use those assets to produce income for their own support. Additionally, the Guide notes that if the assets do not produce an adequate income, the person is expected to rearrange their financial affairs ‘before calling on the community for income support through the social security system’. Plainly, Mr Petruschenko had at all relevant times, and still has, substantial assets in addition to his principal home. Mr Petruschenko was at all relevant times while he accrued the Debt ineligible to receive Newstart. Mr Petruschenko’s assets should have been used before he sought and received social security payments. The hardship rules are therefore inapplicable to Mr Petruschenko.
CONCLUSION
Aside from his principal home, Mr Petruschenko’s real property assets, being the Bemboka Property and the Second Duffy Property, must be applied to the assets test under the Act, in order to determine his eligibility for the payment of Newstart. The inclusion of the value of these properties in the assets test places Mr Petruschenko above the applicable limit at all relevant times during his receipt of Newstart. Mr Petruschenko was therefore ineligible for Newstart.
For the above reasons, the Tribunal finds that, during the relevant periods of time between 5 December 2008 and 13 December 2016, Mr Petruschenko accrued a Debt of $81,901.57 which is owing to the Commonwealth. The Debt cannot be waived and it is not appropriate in the circumstances to provide a further write-off to Mr Petruschenko in relation to the Debt.
For the avoidance of doubt, the Tribunal was presented with no evidence of any alleged prejudice against Mr Petruschenko, as he suggested in his application for review to this Tribunal, and this allegation was not expanded upon by Mr Petruschenko at the hearing. Accordingly, the Tribunal is not satisfied that Mr Petruschenko suffered any prejudice in relation to the administrative processes involved in reviewing the Agency’s decision to raise and recover the Debt.
DECISION
The Tribunal affirms the decision under review pursuant to subsection 43(1)(a) of the AAT Act.

I certify that the preceding 105 (one-hundred and five) paragraphs are a true copy of the reasons for the decision herein of Member W Frost.

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Associate
Dated: 24 November 2020

Date of hearing: 21 October 2020

Applicant:

Solicitors for Respondent:

In person

Mr Alan Quanchi, Services Australia