Randolph and Secretary, Department of Social Services (Social security)
[2025] ARTA 313
•12 February 2025
Randolph and Secretary, Department of Social Services (Social security) [2025] ARTA 313 (12 February 2025)
Applicant/s: Mr Randolph
Respondent: Secretary, Department of Social Services
Tribunal Number: 2024/P191615
Tribunal: General Member A Cichy
Place:Perth
Date:12 February 2025
Decision:The Tribunal affirms the decision under review.
CATCHWORDS
SOCIAL SECURITY – family tax benefit – recoverable debt – father’s estimate of adjusted taxable income – reconciliation with actual income – estimate made while unemployed and not updated when later employed – correct rates used – capacity to pay debt – payment plan – wife’s income – no special circumstances to write off or waive – decision under review affirmed
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsections 161(1B) of the A New Tax System (Family Assistance) (Administration) Act 1999.
Statement of Reasons
BACKGROUND
This review is about whether Mr Randolph owes a recoverable debt to the Commonwealth in relation to family tax benefit (FTB). This turns on whether Mr Randolph was paid more than his correct entitlement to FTB during the 2022/2023 financial year.
Mr Randolph’s FTB claim for the 2022/2023 financial year was granted and paid on 1 February 2023 on an adjusted taxable income estimate of $97,000. His actual combined adjusted taxable income for the 2022/2023 financial year was $120,044.
After reconciling Mr Randolph’s actual adjusted taxable income with the estimates he provided, Services Australia (Centrelink) raised and sought recovery of an FTB debt of $2,586.71 for the 2022/2023 financial year (debt number S4489679) on 18 September 2024 on the basis that Mr Randolph’s combined adjusted taxable income had precluded eligibility for FTB in the 2022/2023 financial year.
On 1 October 2024, Mr Randolph requested a review of the decision and the matter was referred to an authorised review officer.
On 16 October 2024, an authorised review officer of Centrelink reconsidered and decided to affirm the decision.
On 19 October 2024, Mr Randolph applied to the Administrative Review Tribunal for an independent review of Centrelink’s decisions.
On 6 February 2025, the Tribunal conducted a hearing at which Mr Randolph gave oral evidence under affirmation by telephone. The Tribunal had before it documents provided by Centrelink from Mr Randolph’s Centrelink files (262 pages), which were copied to Mr Randolph before the hearing. The Tribunal also had before it documents submitted by Mr Randolph (A1 to A14), including a Statement of Financial Circumstances.
LEGISLATION & ISSUES
The statutory provisions relevant to this review are the A New Tax System(Family Assistance) Act 1999 (the FA Act) and the A New Tax System (Family Assistance) (Administration) Act 1999 (the FA Administration Act).
The issues for the Tribunal to determine in this review application are:
· Was Mr Randolph paid more FTB than he was entitled to receive in the relevant period and thereby incurred a debt to the Commonwealth? And, if so,
· Are there any reasons why all or part of the debt should not be recovered?
Was Mr Randolph paid more than his correct entitlement of FTB?
Section 20 of the FA Administration Act provides for the Secretary to make a determination of a person’s eligibility for (or their rate of) FTB on the basis of a reasonable estimate of adjusted taxable income. That is what has happened here.
A determination made under section 20 of the FA Administration Act remains in force until another determination is made (sections 16 and 21 of the FA Administration Act). Section 105 of the FA Administration Act authorises the Secretary to review a person’s eligibility for (or rate of) FTB when there is sufficient reason to do so.
A review of a person’s eligibility for (or rate of) FTB normally occurs when their previously provided estimate of their combined adjusted taxable income is compared with their verified actual income, provided by the Australian Taxation Office (ATO). The process is called a reconciliation, and its conditions are found in Part 3, Division 1, Subdivision D of the FA Administration Act.
When a person’s actual combined adjusted taxable income is higher than their previously provided estimate of their combined adjusted taxable income, the person may incur a debt. Conversely, if their actual combined adjusted taxable income is lower than their previously provided estimate of their combined adjusted taxable income, the person may receive an arrears payment.
In his claim for FTB, Mr Randolph had two children, aged 17 and 19 respectively in his care. The annual income limit above which FTB Part A was no longer payable in the 2022/2023 financial year for a family having two children aged 13 to 19 was $113,953.
The annual lower earner income limit above which FTB Part B may no longer be paid for couple families with children aged 5 to 18 is $22,527. In the 2022/2023 financial year, Mr Randolph’s actual adjusted taxable income was $32,147 and that of his partner was $87,897. FTB Part B was therefore not payable to Mr Randolph because he had exceeded the annual lower income limit for it to have been payable in the 2022/2023 financial year.
The Tribunal is satisfied that the correct rates have been used by Centrelink to calculate Mr Randolph’s FTB entitlement for the 2022/2023 financial year.
Section 71 of the FA Administration Act provides that if a person receives an overpayment of FTB, the overpayment is a debt to the Commonwealth. Therefore, Mr Randolph owes an FTB debt of $2,586.71 for the 2022/2023 financial year.
Are there any reasons why all or part of the debt should not be recovered?
In Secretary, Department of Social Security v Hales [1998] FCA 219, French J described the legislative regime in relation to debts incurred by individuals in connection with social security payments as follows:
From time to time in the administration of social security benefits overpayments occur. Sometimes these are the result of innocent non-compliance with the requirements of the law which can be affected by the stress associated with the circumstances that led to the receipt of benefits in the first place. The 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. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth.
Although the provisions to which French J was referring in his judgement are those of the Social Security Act 1991, the FA Administration Act contains similar provisions in relation to the writing off and waiver of debts incurred through overpayment of amounts under family assistance legislation. The Tribunal will therefore consider whether the debt can be written off or waived according to the provisions of sections 95, 97 and 101 of the FA Administration Act.
Can the debt be written off?
A debt can be written off under section 95 of the FA Administration Act if the debt is irrecoverable at law (95(2)(a)), the debtor has no capacity to repay the debt (95(2)(b)), the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor (95(2)(c)), or it is not cost effective for the Commonwealth to take action to recover the debt (95(2)(d)).
The provisions of paragraphs 95(2)(c) and 95(2)(d) are also inapplicable to the circumstances in this matter; the applicant’s whereabouts are known and the Commonwealth has a range of ways of recovering the debt in a cost effective manner, including through deductions from future Centrelink payments, deductions against future tax refunds and the payment plan that the applicant says he has entered into with Centrelink already.
A debt is only irrecoverable at law (95(2)(a)) if (pursuant to subsection 95(3)) there is no proof of the debt capable of sustaining legal proceedings for its recovery (93(3)(b)), the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud (93(3)(c)), or in certain situations after a debtor has died (95(3)(d)). None of these is the case here, such that the provisions of paragraph 95(2)(a) are not applicable to this matter.
Subsection 95(4) provides that a debt is recoverable (for the purposes of paragraph 95(2)(b)) if it can be recovered against other social security payments or a person’s income tax refund.
The applicant has claimed in his application to the Tribunal that he is unemployed and his applications for jobseeker payment have been rejected by Centrelink. The Tribunal therefore considered Mr Randolph’s capacity to repay the debt.
In his application to the Tribunal, Mr Randolph wrote that he had entered into a payment plan for the debt to avoid any enforcement against him as this would cause him both severe financial hardship and mental stress, in attempting to manage the debt and his family expenses.[1]
[1] Folio 6
When asked about the repayment plan, Mr Randolph told the Tribunal that he had entered into it on 22 October 2024 and has been making repayments of $99.49 per fortnight since then. The source of the funds for the repayments, he said, was his wife’s income, of which he receives a portion to pay for expenses.
With respect to his eligibility for jobseeker, Mr Randolph told the Tribunal that he did not know whether he was completing the applications correctly or whether his wife’s income makes him ineligible to receive jobseeker.
On the evidence before it, the Tribunal is not satisfied that Mr Randolph does not have the capacity to repay the debt as he is currently repaying the debt with part of the income that his wife earns and provides to him for expenses. A write off of the debt pursuant to paragraph 95(2)(b) is therefore not possible.
Can all or part of the debt be waived due to sole administrative error by the Commonwealth?
Under section 97 of the FA Administration Act, a debt can be waived in circumstances where the debt has occurred solely due to Commonwealth error, the overpayment was received in good faith and the recovery of the debt would cause the debtor severe financial hardship. All three of these conditions must be satisfied in order to exercise a waiver under section 97.
The Tribunal has already found that the FTB arose when Mr Randolph’s estimates of his combined adjusted taxable income were reconciled with his actual verified combined income for the 2022/2023 financial year and therefore did not occur due to administrative error. The debt therefore cannot be waived pursuant to section 97 of the FA Administration Act.
Can the debt be waived due to special circumstances?
Section 101 of the FA Administration Act provides that all or part of a debt may be waived in special circumstances, as follows:
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or(ii) failing or omitting to comply with a provision of the family assistance law; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
The hurdle requirement to the consideration of the special circumstances is that the Tribunal must be satisfied that the debt was not caused by the debtor knowingly making a false statement, false representation or failing to comply with a provision of the family assistance law.
Deputy President Forgie considered the term ‘knowingly’ in Clifford and June Callaghan and Secretary, Department of Social Security [1996] AATA 413 (at [46]) as follows:
What is meant by "knowingly" when used in section 1237AAD set out in paragraph 24 above? I am not aware of its having been considered in this context although either it or the related word "knowing" have been considered in the context of other legislation including the Customs Act 1901, the Trade Practices Act 1974 and the Copyright Act 1968. It is clear from cases that the word "knowingly" is, unless the legislation specifies otherwise, understood to mean actual knowledge.
The Tribunal considered the manner in which the debt arose and asked Mr Randolph on what basis he provided an estimate of his income to Centrelink of $97,000. Mr Randolph told the Tribunal that he provided the estimate of his combined income to Centrelink at a time when he was unemployed, such that it was only the income of his wife that he reported. He said that he did not realise that he should have updated the estimate of their combined income when he subsequently gained employment and only reported this income when he lodged a tax return. The Tribunal was therefore satisfied that Mr Randolph did not knowingly provide false information to Centrelink or knowingly fail to comply with a provision of the family assistance law and therefore proceeded to consider the remaining criteria to exercise a debt waiver under section 101 of the FA Administration Act.
Paragraph 10(b) requires the Tribunal to be satisfied of two separate elements in considering whether a debt should be waived: firstly, that special circumstances other than financial hardship exist, and secondly, that those special circumstances make it desirable to waive the debt.
The term ‘special circumstances’ is not defined in the FA Administration Act. The term and its application, however, have been considered by both the Administrative Appeals Tribunal and the Federal Court on numerous occasions. In Beadle and Director-General of Social Security [1984] AATA at [12], the AAT held that for circumstances to be ‘special’, they should be ‘unusual, uncommon or exceptional’. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 the Federal Court held, however, that the exercise of discretion was not to be confined to ‘exceptional’ cases, but there should be something about a case to distinguish it from one that is ordinary or usual. The Tribunal observes, however, that for the purposes of the FA Administration Act, financial hardship alone does not constitute ‘special circumstances’.
In Davy and Secretary, DEWR [2007] AATA 1114, Deputy President Forgie considered the connection between the words ‘special circumstances’ and ‘that make it desirable to waive’ as follows:
Special circumstances are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances … that make it desirable to waive”. That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it … He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement.
The Tribunal, therefore, must consider both whether the circumstances of this case distinguish it from the ordinary or usual case, and whether it would be unreasonable, unjust or inappropriate to recover the debt from Mr Randolph.
Mr Randolph’s evidence with respect to special circumstances was as follows:
(a) He is currently unemployed and has been unemployed for the past 18 months.
(b) The financial hardship he faces is that he depends upon his wife’s income to pay all expenses, and therefore needs to make choices about which items he will need to pay for or purchase in any given period.
(c) Most money in his household is now outgoing rather than incoming.
(d) Drawing the Tribunal’s attention to the Statement of Financial Circumstances he submitted before the hearing, Mr Randolph pointed out that he has both a debt to Centrelink and a separate FEE-HELP debt that he must repay.
(e) He would happily repay the debt were he employed and sought leniency with respect to the debt on that basis.
The Tribunal considered Mr Randolph’s circumstances but was not persuaded that the matters he raised extended beyond financial hardship alone. The Tribunal therefore declines to exercise the discretion pursuant to section 101 of the FA Administration Act to waive the debt.
DECISION
The Tribunal affirms the decision under review.
| Date(s) of hearing: | Thursday, 6 February 2025 |
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