Raymond and Secretary, Department of Social Services (Social services second review)

[2017] AATA 879

Raymond and Secretary, Department of Social Services (Social services second review) [2017] AATA 879 (29 May 2017)

Division:GENERAL DIVISION

File Number:           2016/5826

Re:Nicola Raymond

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Senior Member D R Davies

Date:29 May 2017

Place:Brisbane

The Tribunal affirms the decision under review.

.......................[sgd]........................................

Senior Member D R Davies

CATCHWORDS

SOCIAL SECURITY – Family Tax Benefit debts raised – basis to write off or waive recovery of debt – any special circumstances to waive or write off all or part of the debt - income tax years based on estimates of income – financial difficulty is not by itself a special circumstance – decision under review affirmed

LEGISLATION

A New Tax System (Family Assistance) Act 1999

A New Tax System (Family Assistance) (Administration) Act 1999

CASES

Angelakos v Secretary Department of Employment and Workplace Relations [2007] FCA 25

Groth & Secretary Department of Social Services [1995] FCA 1708

Hales v Secretary of Department of Social Security [1998] FCR 154

Sekhon v Secretary Department of Family and Community Services [2003] FAFC 190

SECONDARY MATERIALS

Family Assistance Guide

REASONS FOR DECISION

Senior Member D R Davies

29 May 2017

BACKGROUND

1. This is an Application by Nicola Raymond (the Applicant) for review of a decision made by the Administrative Appeals Tribunal Social Services and Child Support Division (AAT1) on 20 September 2016 affirming decisions made by the Department of Human Services (the Department) to raise and recover the following debts from the Applicant:

   ·A family tax benefit in the amount of $2,342.63 for the 2012/2013 income tax year.

   ·A family tax benefit in the amount of $4,801.91 for the 2013/2014 income tax year.

   ·A family tax benefit in the amount of $1,279.44 for the 2014/2015 income tax year.

   ·A school kids bonus debt in the amount of $1,684.00 for the 2014/2015 income tax year (the Debts).[1]

   [1] Exhibit 2, paras 8-10.

2. During the period 1 July 2012 to 30 June 2015 (relevant period) the Applicant was receiving family tax benefit (FTB) based on estimates of her and her husband’s combined adjusted taxable income. After later receiving verification of the actual adjusted taxable income figures for the relevant tax years, the Department decided to raise the debts referred to in paragraph 1 as follows:

   ·On 4 March 2015 a decision was made to raise and recover a FTB debt in the amount of $4,801.91 for the 2013/2014 income tax year and a notice was sent on the same date.[2]

   ·On 27 November 2015 a decision was made to recover a FTB debt in the amount of $1,279.44 and a School Kids Bonus (SKB) debt in the amount of $1,684.00 for the 2014/2015 income tax year. Notices were sent on the same date.[3]

   ·On 1 March 2016 a decision was made to raise and recover a FTB debt in the amount of $2,342.63 for the 2012/2013 income tax year and a notice was sent on the same date.[4]

   [2] Exhibit 1, T Docs, T8 pp 156-159.

   [3] Exhibit 1, T Docs, T10 pp 163-164 and T11 pp 165-168.

   [4] Exhibit 1, T Docs, T16 pp 180-183.

3. On 8 March 2016 the Applicant sought a review of the debts.[5]

   [5] Exhibit 1, T Docs, T17 pp 184-187.

4. On 26 April 2016 an Authorised Review Officer (ARO) reviewed and affirmed the decisions.[6]

   [6] Exhibit 1, T Docs, T19 pp 191-197.

5. On 20 May 2016 the Applicant wrote to the Department setting out reasons why she thought that the decision was incorrect.  In this letter she stated:

   “I really do not see how you cannot consider this to be an administrative error by Centrelink, as I was only obeying instructions given to me by them in the first place.”[7]

   [7] Exhibit 1, T Docs, T21 p 201.

6. On 2 August 2016 the Applicant applied for review of the ARO’s decision to AAT1.[8]

   [8] Exhibit 1, T Docs, T24 pp 214-215.

7. On 20 September 2016 AAT1 affirmed the decision under review finding that the debts had been properly raised and that there was no basis to write-off the debts under s95 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Administration Act) or to waiver the debts under s101 of the Administration Act.[9]

   [9] Exhibit 1, T Docs, T2 pp 7-12.

8. On 28 October 2016 the Applicant applied to this Tribunal for review.[10]

   [10] Exhibit 1, T Docs, T1, pp 1-6.

   THE LEGISLATIVE PROVISIONS

9. The relevant legislation is contained in the:

   ·A New Tax System (Family Assistance) Act 1999 (the Act).

   ·A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).

10. Schedule 1 of the Act sets out how to calculate the rate of FTB. An entitlement is calculated for the whole financial year, regardless of any change to a person’s circumstances.

11. Section 20 of the Administration Act allows the Secretary to use an estimate of adjusted taxable income provided by the individual, for the purpose of calculating the individual’s FTB where actual information is not available. The Secretary then considers whether the estimate is reasonable under s20(1)(d). If the estimate is reasonable, the Secretary may determine the individual’s eligibility for, and rate of, FTB on the basis of the estimate. If the estimate is not considered reasonable, the individual’s eligibility or rate cannot be determined.[11]

    [11] The Administration Act, s20(2).

12. Sections 20A and 20B of the Administration Act allow the Secretary to index an estimate or actual income based on previous financial years and information provided by the ATO in situations where a person is in receipt of fortnightly payments, and does not provide an income estimate for a new financial year as required. Section 21 of the Administration Act further states that a rate determination made in such circumstances will come into force when it is made.

13. Section 22 of the Administration Act states that the Secretary must provide notice to a person affected by such a determination.

14. A person in receipt of FTB fortnightly is obliged pursuant to s25 of the Administration Act to give information about their circumstances which may affect their rate of eligibility for FTB which includes income changes.

15. The Family Assistance Guide at 5.2.2 also notes the following:

    “An instalment individual (1.1.R.07) must notify Centrelink if there is or is likely to be any increase or decrease in their or their partner's (1.1.1.P.30) income.

    Example: The individual must notify Centrelink where their:

    ·estimate of ATI may go above or below the lower income free area (1.1.I.40) for FTB Part A or the income free area for FTB Part B, or

    ·estimate of income is above or below the higher income free area (1.1.H.10), or

    ·maintenance (1.1.M.10) income increases or decreases.”

16. Section 105 of the Administration Act authorises the Secretary to review a person’s entitlement where there is sufficient reason such as information that a rate may or may have been incorrect.

17. The former s35UA of the Act set out the basic eligibility criteria for SKB and in particular required, amongst other things, the individual’s adjusted taxable income to be $100,000.00 or less. This provision has since been repealed, but is nevertheless important in determining whether the Applicant was entitled to receive SKB at the time she was in receipt of it.

18. Section 71 of the Administration Act provides that if an amount is paid to a person by way of assistance and the received amount is greater than the correct amount of assistance that should have been paid, the difference between the received amount and the correct amount is a debt due to the Commonwealth.

19. Section 95 of the Administration Act provides for the possibility of writing off the debts for a period and relevantly states:

    (1)    The Secretary may, on behalf of the Commonwealth, decide to write-off a debt for a stated period or otherwise, but only if subsection (2), (4A) or (4B) applies. 

    (2) The Secretary may decide to write-off a debt under subsection (1) 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.

20. I note that neither s95(4A) nor s95(4B) applies here.

21. Section 97 of the Administration Act provides:

    (1)The Secretary must waive the right to recover the proportion (the administration error proportion) of a debt that is attributable solely to an administration error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.

    (2)The Secretary must waive the administrative error proportion of a debt if:

    (a)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and

    (b)the person would suffer severe financial hardship if it were not waived.

22. Section 101 of the Administration Act provides for the possibility of waiving all or part of the debts on the grounds of special circumstances and states:

    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.

    (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.

    ISSUES FOR THE TRIBUNAL

23. The issues to be considered by the Tribunal are:

    ·Is there a debt (or debts) for the relevant period?

    ·If there is a debt (or debts), is there a basis to write-off or waive recovery of the debt?

    CONSIDERATION

    Is there a debt for the relevant period

24. The Applicant appeared in person and gave evidence before the Tribunal.  The Applicant impressed me as an honest witness.

25. The Exhibits in accordance with the Exhibit List were tendered into evidence with the consent of both parties. Those Exhibits were:

    ·Exhibit 1 – Tribunal Documents (T Docs).

    ·Exhibit 2 – Secretary’s Statement of Facts Issues and Contentions.

    ·Exhibit 3 – Letter from the Department of Human Services to Ms Raymond dated 10 February 2017 including Attachments A, B & C.

    ·Exhibit 4 – Email from the Department of Human Services dated 16 March 2016, including Attachments.

26. The Applicant does not dispute that she has been overpaid FTB and SKB. The Applicant told the Tribunal that at the pre-hearing conference she had been under the impression that the amount of the debts was approximately $8,000.00, although the total amount of the four debts is $10,107.98. The Respondent informed the Tribunal that as at 9 February 2017 the then balance of the debts was $8,572.24. It is likely that this is the amount to which the Applicant was referring and which was discussed at the conference. However, for the purposes of the current application it is the total amount of each debt which has to be considered. It should also be noted that matters discussed at a pre-hearing conference are confidential and are not relevant to the decision making of this Tribunal. The Department’s documentation indicates that the Applicant was paid FTB in the 2012/2013 and 2014/2015 income tax years based on estimates of income that turned out to be less than the actual adjusted taxable income figures. Those figures are:

    ESTIMATES[12]

    2012/2013 income tax year

    [12] Exhibit 2 para 4.

Date of estimate	Applicant’s estimate	Husband’s estimate
1 July 2012	$0.00	$0.00
13 March 2013	$0.00	$36,000.00

2013/2014 income tax year

Date of estimate	Applicant’s estimate	Husband’s estimate
1 July 2013	$0.00	$37,656.00
13 January 2013	$0.00	$62,256.00

2014/2015 income tax year

Date of estimate	Applicant’s estimate	Husband’s estimate
1 July 2014	$0.00	$64,124.00
3 November 2014	$0.00	$99,708.00

1. The Applicant and her husband’s actual adjusted taxable income for those years was as follows:[13]

   2012/2013 income tax year

   [13] Exhibit 2 para 5.

Date of Lodgement	Applicant’s income	Husband’s income
4 December 2013	$0.00	$59,518.00

2013/2014 income tax year

Date of Lodgement	Applicant’s income	Husband’s income
26 September 2014	$0.00	$96,803.00

2014/2015 income tax year

Date of Lodgement	Applicant’s income	Husband’s income
3 November 2015	$0.00	$115,138.00

1. For the 2014/2015 tax year, the adjusted taxable income was also more than $100,000.00, which meant that the Applicant was not entitled to the SKB paid for that year.[14]

   [14] The Act, s 35UA (prior version).

2. The evidence is that during the relevant period, the Applicant was sent numerous notices which amongst other things notified her of her obligations to update her estimated taxable income and that her and her husband’s income would be checked with the Australian Tax Office (ATO) at the end of each year to verify that she had been paid the correct amount.  The notices sent to the Applicant are listed in Exhibit 2 para 7 and can be found in T5 in Exhibit 1.

3. In relation to the FTB debts, I am satisfied that during the relevant period the Applicant’s actual combined adjusted taxable income was more than her estimated income and she was consequently paid more than she was entitled to.

4. In relation to the SKB debt I am satisfied that the Applicant’s actual combined adjusted taxable income was more than $100,000.00 for the 2014/2015 income tax year and in accordance with s35UA of the Act, she was therefore not entitled to receive that payment for that income year.

5. Accordingly, I am satisfied that the Applicant was overpaid the following amounts:

   ·$2,342.63 for FTB for the 2012/2013 tax year.

   ·$4,801.91 for FTB for the 2013/2014 tax year.

   ·$1,279.44 for FTB for the 2014/2015 tax year.

   ·$1,684.00 for SKB for the 2014/2015 tax year,

   and that those debts are due to the Commonwealth under s71 of the Administration Act.

   Should the Applicant’s debt be recovered?

6. In her evidence and submissions to the Tribunal, the Applicant contended that the debts should not be recovered because:

   ·There was an administrative error made by the Department in that she was misinformed that she did not need to respond to the various letters which she received requesting updated income information and that the Department would check income with the ATO and make any necessary adjustments; and

   ·That she was never told that the cut-off was $100,000.00 and she thought it was $150,000.00; and

   ·That she and her family are suffering financial hardship and that there are special circumstances.

7. Those contentions are also stated in the various letters which she wrote to the Department.[15]

   [15] Exhibit 1, T Docs, T14 pp 175-176; T21 pp 199-204.

   Is there a basis to write-off the debts

8. As previously mentioned under s95 of the Administration Act, the Secretary may, relevantly, write-off a debt if the debtor has no capacity to repay the debt.[16] Section 95(4) of the Administration Act provides that a person will have a capacity to repay a debt if it is recoverable from deductions from or setoffs against certain types of payments which might be due to the person from the Commonwealth unless recovery by those means would cause the person severe financial hardship.

   [16] The Administration Act, s95(2)(c).

9. There is no evidence to suggest that any of those types of deductions or payments under s95(4) are due to the Applicant in this case. Accordingly, I do not consider that s95(4) is applicable to the present case.

10. Consequently, I consider that whether the Applicant has no capacity to repay the debt should be considered on ordinary principles having regard to the Applicant’s financial circumstances. In this respect, the Applicant’s evidence is that her husband was made bankrupt in 2013 and that they are supporting their family of five people on his income. They are struggling financially and often do not have money to put food on the table. On many weeks they are not able to pay bills and on occasions have no money for petrol or food. They own two very cheap cars.[17]

    [17] Exhibit 1, T Docs, T14 pp 176.

11. The Applicant has also stated that their monthly budget pushes them way past what her husband earns each month. Her husband’s income supports the household and they have two children studying at a Tertiary level. Her husband was discharged from bankruptcy in April 2016. The Applicant acknowledges that her husband earns above the minimum wage but there is no spare money.[18]

    [18] Exhibit 1, T Docs, T21 pp 200-203.

12. I note that the Applicant’s husband’s income for the 2014/2015 year was $115,138.00. I also note that the Applicant provided AAT1 with her monthly budget for 2016 which indicated that the family had a monthly income of $7,100.00 and total monthly expenses of $7,352.63. Those monthly expenses included essential living expenses along with other expenses such as money saved for presents or future contingencies, as well as money for sports fees, passport renewal, pet expenses and photos.[19] Whilst that evidence was not presented by the Applicant to this Tribunal, I have taken note of it.

    [19] Exhibit 1, T Docs, T2 pp 11.

13. Although I do not doubt that the Applicant and her family are experiencing difficult financial circumstances, having regard to the Applicant’s husband’s income for the 2014/2015 year and the fact that he was discharged from bankruptcy in April 2016, I am not satisfied that the Applicant has no capacity to repay the debts.

14. Accordingly I find that the debts should not be written off on the ground that the Applicant has no capacity to repay the debts under s95(2)(b) of the Administration Act.

15. There is no evidence before this Tribunal which would support the debts being written-off on any of the other grounds under s95 of the Administration Act.

    Is there a basis to waive the debt?

    Administrative Error

16. As previously mentioned, under s97 of the Administration Act, the Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if s97(2) applies to that proportion of the debt.

17. Whilst “administrative error” is not defined in the Administration Act, the phrase was considered in Sekhon v Secretary Department of Family and Community Services[20].  Justice Heerey (at para 15) noted:

    “That error must have certain characteristics; it must be

    ·an administrative error;

    ·made by the Commonwealth; and

    ·to which the debt (scil.a valid debt) is solely attributable”.

    [20] [2003] FAFC 190.

18. In that case, Justice Selway (at para 35) said:

    “The words ‘a debt attributable solely to an administrative error’ can be paraphrased as meaning that the only cause that objectively can be ascribed to the relevant debt is an administrative error.”

19. In the present case, the Applicant’s evidence to the Tribunal when asked to specify the error was that there were two errors by the Department:

    ·That she was never told that the cut-off was $100,000.00 and she thought it was $150,000.00; and

    ·That the Department’s representative when she rang up told her that she could just sit back and not respond and not provide income updates.

20. In relation to the second of those errors, the Applicant also gave evidence that she received the letter from the Department dated 31 December 2012,[21] and that she knew that the Department would check income with the ATO and that the benefit would be adjusted.

    [21] Exhibit 1, T Docs, T15 pp 89-91.

21. The Applicant gave evidence that the phone call with the Department’s representative was in about March 2013.  She requested the Department for records of her phone calls to the Department which were provided by the Department and are in Exhibit 3. At page 4 of Exhibit 3 there is a record of a phone call with the Applicant on 13 March 2013 with the notation:

    “Customer was informed that income may be confirmed with the ATO  <Yes>”.

1. In her letter to the Department dated 20 May 2016, the Applicant states:

   “I did not respond to the letter from Centrelink for two reasons:

   1)    As the letter from Centrelink says not to respond if I am agreeable with the overpayment being debited from future payments. And I was agreeable. So as per the letter; I did not respond.  Every single letter from Centrelink states on the back what will happen if you do not respond, and it is always the same: that my Family Tax Benefit would be adjusted accordingly…

   2)    I was also under the impression that ‘not responding’ was perfectly acceptable as, and this is important for you to note, I was told by Centrelink that there is no need to contact them with my husband’s income changes, as they would automatically adjust my FTB according to his annual tax return”.[22]

   [22] Exhibit 1, T Docs, T21 p 201.

2. Even if the Applicant was told that she did not need to respond to the letters from the Department in relation to providing updates of income, it is apparent that she understood that if she did that, the Department would check her husband’s income each year with the ATO and adjust the FTB accordingly. I note that the Department’s letters to the Applicant in relation to income estimates and the risk of overpayment are quite clear as to the consequences. For example, the letter of 29 April 2013 states:

   “The payments you receive will be checked against your actual annual family income when you lodge your tax return… If you have received more than you are entitled to, this amount will need to be repaid”.[23]

   [23] Exhibit 1, T Docs, T5 pp 106-108.

3. Whilst it may be that the Applicant did not fully appreciate that not responding could result in an overpayment which would have to be repaid to the Department, I do not consider that there has been any administrative error by the Department in relation to what she may have been told about not having to respond to letters from the Department regarding income.

4. In relation to the Applicant’s claim that it was an error that she was not told that the cut-off was $100,000.00, this presumably relates only to the SKB. Even if this was the case, s35UA of the Act was clear that an individual is eligible for SKB on a bonus test day if the individual’s adjusted taxable income for the income year in which the bonus test day occurs is $100,000.00 or less. 

5. Accordingly, I do not consider that there has been any administrative error by the Department in relation to this.

6. It is not necessary to consider the further elements required by s97(2) as they only apply where there has been an administrative error in relation to the debt or a proportion of the debt.

7. Accordingly, I find that there has not been an administrative error made by the Commonwealth in relation to any of the debts and that it is not appropriate to waive recovery of any part of the debts on that ground.

   Special Circumstances

8. As I have previously mentioned, s101 of the Administration Act provides that the Secretary may waive 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 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.”

9. The meaning of “special circumstances” for the purposes of the Administration Act and other social security legislation has been considered in many cases. In Groth & Secretary Department of Social Services,[24] the Court formulated that these were circumstances that distinguish an Applicant’s case from others and take it “out of the usual or ordinary case”.  That formulation was also adopted in Angelakos v Secretary Department of Employment and Workplace Relations.[25]

   [24] [1995] FCA 1708.

   [25] [2007] FCA 25.

10. In the present case, the Applicant gave evidence that the special circumstances relating to her case were her family’s financial circumstances and the wrist and hand injury which she has suffered. In this respect, she also referred to her letter to the Department,[26] where she provides information relating to her financial circumstances and her wrist and hand injury which she says constitute the special circumstances of her case.

    [26] Exhibit 1, T Docs, T14 pp 176.

11. However, s101(b) of the Administration Act makes it clear that special circumstances “other than financial hardship alone” are required. In Hales v Secretary of Department of Social Security,[27] French J stated:

    “The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special…. the exclusion of financial hardship alone as a special circumstance does not mandate its inclusion in the range of matters constituting such circumstances for the purpose of enlivening the Secretary’s discretion.”

    [27] [1998] 82 FCR 154.

12. In this case I do not consider that the Applicant’s wrist and hand injury is a special circumstance. It therefore follows that the Applicant’s financial circumstances alone cannot constitute the special circumstances necessary for the purposes of s101.

13. I find that there are no special circumstances which make it desirable to waive the debts or any part of the debts.

    CONCLUSION

14. The Application for review is unsuccessful and the decision made by AAT1 on 20 September 2016 is affirmed.

I certify that the preceding 62 (sixty -two) paragraphs are a true copy of the reasons for the decision herein of Senior Member D R Davies

.....................[sgd]..............................................

Associate

Dated: 29 May 2017

Date of hearing:	4 May 2017
Applicant:	In person
Advocate for the Respondent:	Ms Jasmine Forsyth
Solicitors for the Respondent:	Department of Human Services