Re Davy and Secretary, Department of Employment and Workplace Relations
[2007] AATA 1
•3 January 2007
Janke and Secretary, Department of Social Services (Social services second review) [2016] AATA 321 (19 May 2016)
Division
GENERAL DIVISION
File Number(s)
2015/5139
Re
Toni Janke
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member A C Cotter
Date 19 May 2016 Place Brisbane The decision under review is affirmed.
...........................[sgd].............................................
Senior Member A C Cotter
CATCHWORDS
DEBT RECOVERY – Family Tax Benefit – whether debts due – whether debts recoverable – write off – administrative error waiver – special circumstances waiver – where write off not available – where no special circumstances – decision under review affirmed.
LEGISLATION
A New Tax System (Family Assistance) Act 1999 (Cth)
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) ss 28, 71, 95, 97, 101
CASES
Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1
Director-General of Social Services v Hales (1983) 78 FLR 373
Dranichnikov v Centrelink (2003) 75 ALD 134
Price and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 92
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Re Secretary, Department of Social Security and Margarita Rodriguez [1991] AATA 297Shi v Migration Agents Registration Authority (2008) 235 CLR 286
SECONDARY MATERIALS
The Macquarie Dictionary (rev 6th ed, Macquarie Dictionary Publishers Pty Ltd, 2013)
REASONS FOR DECISION
Senior Member A C Cotter
19 May 2016
INTRODUCTION
Ms Toni Janke was paid Family Tax Benefit (“FTB”) by fortnightly instalments in the 2003/2004 and 2004/2005 financial years. During those years, she was a member of a couple with her then husband, Mr Graham Demmery.
FTB is means tested, and where the recipient is partnered, the joint income of the recipient and their partner is taken into account. Where, like Ms Janke, the recipient elects to receive FTB by instalments, FTB is paid on the basis of an estimate of the income of the recipient and their partner for that year; any necessary adjustment is made following the lodgement of the income tax returns for the recipient and the partner for that year. Accordingly, both Ms Janke and Mr Demmery were required to lodge their returns for the 2003/2004 and 2004/2005 financial years.
Ms Janke and Mr Demmery separated in January 2009. At that time, neither of them had lodged their income tax returns for the 2003/2004 and 2004/2005 financial years. Ms Janke lodged her income tax returns for those years in December 2011.[1] At the date of the hearing, it was understood that Mr Demmery had still to lodge his returns for those years.
[1] Exhibit 1, T Documents, T 5, pages 23-24, Authorised Review Officer’s letter to Ms Janke, and notes dated 29 May 2015.
On 5 November 2005, Centrelink raised a debt in the amount of $7,457.58 (“2003/2004 debt”), being the entire amount of FTB paid to Ms Janke during the 2003/2004 financial year. That was due to the fact that she and Mr Demmery had failed to lodge their tax returns for that financial year.[2]
[2] Ibid page 24.
For the same reason, on 7 November 2006, Centrelink raised a debt in the amount of $6,625.24 (“2004/2005 debt”), being the entire amount of FTB paid to Ms Janke during the 2004/2005 financial year.[3]
[3] Ibid.
Both the 2003/2004 debt and the 2004/2005 debt were fully recovered, in August 2010 and April 2011 respectively.[4]
[4] Ibid.
Ms Janke subsequently sought a review of the decisions to raise the 2003/2004 debt and the 2004/2005 debt. An Authorised Review Officer (“ARO”) affirmed the original decisions,[5] and a subsequent review by the Social Services & Child Support Division (“SSCSD”) of this Tribunal affirmed that decision.[6]
[5] Ibid pages 22-31.
[6] Exhibit 1, T Documents, T 2, pages 4-8, Social Services & Child Support Division’s decision and reasons for decision dated 2 September 2015.
Dissatisfied with the outcome, Ms Janke has applied to the General Division of the Tribunal for a review of the SSCSD decision.
ISSUES FOR TRIBUNAL
The issues for me to determine are:
(a)whether Ms Janke was paid more than her correct entitlements of FTB for the 2003/2004 and 2004/2005 financial years;
(b)if so, whether those excess amounts were debts due to the Commonwealth; and
(c)if so, whether those debts were recoverable in part or in full.
I deal with those issues below.
CONSIDERATION
Was Ms Janke paid more than her correct entitlements?
The FTB scheme is governed by A New Tax System (Family Assistance) Act 1999 (Cth) and A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (“Administration Act”).
Section 28 of the Administration Act applied (as at the date of the decisions) to a person if they were paid FTB in respect of a particular financial year and they or their partner were required to lodge tax returns in respect of that year but, by the financial year occurring two years later, the tax returns had not been lodged. In such a case, sub-s (2) provided:
(2) If this section applies, the Secretary must vary the determination so that it has the effect that the claimant is not, and never was, entitled to family tax benefit for the cancellation days.
In the present case, Ms Janke was paid FTB for the relevant years and she and Mr Demmery were required to lodge their tax returns. With respect to the 2003/2004 financial year, as no returns had been received from them, s 28 operated such that she was not entitled to be paid FTB. A similar situation occurred in respect of the 2004/2005 financial year.
As a result, Ms Janke was paid more than her correct entitlements in respect of both years.
Were the excess amounts debts due to the Commonwealth?
Section 71 of the Administration Act states that if an amount of FTB has been paid to a person and the person was not entitled to the payment, the amount is a debt due to the Commonwealth.
As Ms Janke was not entitled to the FTB payments in the relevant years due to the operation of s 28(2), I consider those amounts, namely $7,457.58 in 2003/2004 and $6,625.24 in 2004/2005, were debts due to the Commonwealth.
Were those debts recoverable?
The Administration Act contains a number of provisions giving the Secretary the power to write off debts or to waive the right to recover the whole or portion of a debt. I discuss those provisions below.
Write off
Section 95 of the Administration Act states that the Secretary may, on behalf of the Commonwealth, decide to write off a debt for a stated period or otherwise, but only where one of the situations specified in sub-ss (2), (4A) or (4B) exists. For present purposes, sub-s (4B) is not relevant.
The situations outlined in sub-s (2) are where: a debt is irrecoverable at law; the debtor has no capacity to repay the debt; the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or where it is not cost effective for the Commonwealth to take action to recover the debt.
At the outset, I have some reservations about the ability to “write off” a debt which has already been prepaid in full, and discharged. In saying that, I note that The Macquarie Dictionary relevantly attributes the following meaning to that term: “to treat as an irreparable or non-recoverable loss”.[7] In any event, none of the circumstances in s 95(2) exist in the present case. In particular, there is no suggestion that Ms Janke did not have the capacity to repay, the debts having been repaid in full in 2010 and 2011 (presumably by withholdings), apparently without Ms Janke’s knowledge at the time.[8]
[7] The Macquarie Dictionary (rev 6th ed, Macquarie Dictionary Publishers Pty Ltd, 2013).
[8] Ms Janke told me at the hearing that she first became aware of the debts and the fact that they had been repaid (through what she described as a “garnishee”) when she sought admission as a legal practitioner in January 2015.
Subsection (4A) allows the Secretary to write off a debt if the claimant and their partner subsequently separate. It anticipates the claimant lodging an income tax return for the relevant period and receiving an assessment while the ex-partner has not lodged a return. However, I do not think it has application in the present case. By the time Ms Janke had lodged her returns and received her assessments for the relevant years, the debts for both years had already been repaid in full; there was no debt to write off.
I therefore do not think that s 95 has application in the present case.
Waiver
There are two provisions of the Administration Act which deal with waiver and which are potentially relevant in the present case – administrative error waiver and special circumstances waiver.
Administrative error waiver
Section 97 of the Administration Act provides that the Secretary must waive the right to recover that proportion of a debt that is attributable “solely” to administrative error made by the Commonwealth, if certain conditions are satisfied. There is no suggestion in the present case that there was an administrative error by the Commonwealth or, if there was, that it was attributable for any part of the 2003/2004 or 2004/2005 debts. In any event, it is a requirement of the section that the debtor would suffer “severe financial hardship” if the debt were not waived. There is no evidence of Ms Janke suffering, or being exposed to, such hardship. For those reasons, I do not consider that this provision is applicable in this instance.
Special circumstances waiver
Waiver on the grounds of “special circumstances” is provided for in s 101 of the Administration Act:
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.
In the present case, there is no suggestion that Ms Janke knowingly made a false statement or representation or that she knowingly omitted to comply with a provision of the family assistance law. Having already found that write off was not open, waiver (if it were available) would be more appropriate. Therefore, whether waiver is available under this section depends on whether “special circumstances” exist in this instance which make it desirable to waive.
What are “special circumstances”?
The term “special circumstances” is not defined in the Administration Act, but has been extensively considered by the courts and by this Tribunal in the context of this and similar legislation. It has often been said that the expression looks to circumstances that are unusual, uncommon or exceptional, or which “have a particular quality of unusualness that permits them to be described as special”.[9]
[9] See, for example, Re Beadle and Director-General of Social Security (1984) 6 ALD 1, 3 (Toohey J, Member Wilkins and Member Billings); and Dranichnikov v Centrelink (2003) 75 ALD 134, 148 (Hill J).
It has also been emphasised that, in exercising the discretion in a particular instance, the decision-maker must have regard to the legislative intent of the Act:
In the exercise of the discretion…, the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the…Act.[10]
[10] Re Ivovic and Director-General of Social Services (1981) 3 ALN N95.
In Director-General of Social Services v Hales, French J observed that the taxpayer is entitled to expect that, in the ordinary course, money paid to people which they are not entitled to will be recovered.[11] In a similar vein, Deputy President Forgie remarked in Davy and Secretary Department of Employment and Workplace Relations:
The “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.[12]
Ms Janke’s circumstances
[11] (1983) 78 FLR 373.
[12] [2007] AATA 1,114, [80] (Senior Member Hastwell).
Ms Janke appeared at the hearing and gave evidence as to her circumstances.
She told me that for the relevant financial years, Mr Demmery was the primary income earner, she not having been employed for part of that time. Her taxable income in those years was very modest.[13]
[13] See Exhibit 3, Notices of Assessment for years ended 30 June 2004 and 30 June 2005.
Ms Janke described her relationship with Mr Demmery as a turbulent and violent one, with alcoholism being a contributing factor. There was much financial stress, to the point where their bank exercised a power of sale over their home;[14] it was, in her words, a “financial mess”. By about January 2009, Mr Demmery had moved out of the matrimonial home. During 2010, he had some contact with her and her two daughters for family birthdays and the like, but he has had no financial connection with her since that time. They finally divorced in January 2015.
[14] See Exhibit 4, Correspondence with Bank of Queensland Limited.
After they separated, Ms Janke set about clearing up the financial mess that was left. Mr Demmery did not cooperate. Both Ms Janke and her tax accountant made numerous attempts to involve Mr Demmery in the process of finalising tax returns, especially partnership returns, without success.[15] Ms Janke explained that her two daughters were the children of a previous relationship and Mr Demmery provided no support; it was always a “bone of contention” during their marriage. She did tell me, however, that in recent times, her daughters’ father had been required by the Child Support Agency to pay a contribution to her.
[15] See Exhibit 1, T Documents, T 7, page 39, letter from H&R Block dated 24 August 2015.
Ms Janke’s daughters are now 20 and 21 years of age. Her youngest daughter is a student who lives with her and whom she still supports (although that daughter now has a part time job). Her eldest daughter lives in Arnhem Land in the Northern Territory.
A Statement of Financial Circumstances had previously been completed by Ms Janke for the purposes of the SSCSD hearing.[16] Ms Janke confirmed that the income she disclosed was “roughly about right”, although she added that she had recently commenced a new job and her salary had increased. She said that the modest savings deposit she had previously disclosed was the residue of a property settlement and had been depleted; she now has no savings. She still owes about $25,000.00 on a lease over her car (which she valued at $19,000.00). Although she provided that information, Ms Janke maintained that evidence concerning her current circumstances is not relevant to the consideration of “special circumstances”.
Are Ms Janke’s circumstances “special”?
[16] Exhibit 1 T Documents, T 6, pages 32-36, Statement of Financial Circumstances dated 28 July 2015.
While I sympathise with Ms Janke, I do not consider that her circumstances are so unusual or out of the ordinary as to warrant the waiver of the right to recover the debts.
Although her ex-husband left a “financial mess” for her to clean up and was uncooperative in the completion of returns, the fact remains that she was also non-compliant with the FTB requirements, not lodging her own returns until six or seven years after the relevant financial years.
I accept that during the relevant financial years, the family’s financial circumstances were difficult, but that is not unusual or out of the ordinary for many recipients of social security and other benefits.
It is also significant that the debts have been repaid in full, without apparently any significant hardship having been experienced by Ms Janke; she was not aware of the debts having been raised, let alone the fact that they had been repaid in full, until some considerable time later.
Further, I believe that Ms Janke’s current financial circumstances are a relevant factor to be considered in addressing the question of whether the right to recover the debt should be waived.[17] Ms Janke is in full time employment, receiving a reasonable income. She has some debt and no savings but is also owed money by her former partner, the father of her daughters. Her daughters are now adults, although she still supports the younger of the two. From a financial perspective, I do not think that Ms Janke’s current circumstances would warrant waiver of the right to recover the debts, especially in circumstances where they were repaid in full some five to six years ago.
[17] See Shi v Migration Agents Registration Authority (2008) 235 CLR 286; see also Re Secretary, Department of Social Security and Margarita Rodriguez [1991] AATA 297.
Finally, it needs to be remembered that the debts arose in circumstances where Ms Janke and Mr Demerry failed to meet their obligations under the FTB regime. In those circumstances, Ms Janke was not entitled to the payments which she received. In the words of French J in Hales, there is an expectation that monies paid to persons not entitled to them will be recovered.
For the sake of completeness, I should refer to the decision in Price and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs,[18] to which the Secretary’s representative referred me. I agree with the Secretary’s submission that that decision is distinguishable from the present case. In this instance, the debts arose from a failure by both Ms Janke and her ex-husband to lodge their tax returns, whereas it appears in Price that only the applicant’s ex-partner failed to comply with that requirement. In Price the applicant was under a degree of financial pressure and had the responsibility of raising three children on parenting payment, creating on going uncertainty for her. With the debts repaid in full for some years and Ms Janke in full time employment and supporting one adult child, that degree of pressure and uncertainty is absent from the present case.
[18] [2010] AATA 92.
CONCLUSION
For the reasons outlined above, I do not believe that the provisions relating to the write off of debt are applicable in this case. Nor do I consider that Ms Janke’s circumstances are special so as to warrant the waiver of the recovery of the debts in this instance.
Accordingly, the decision under review is affirmed.
I certify that the preceding 44 (forty -four) paragraphs are a true copy of the reasons for the decision herein of Senior Member A C Cotter .......................[sgd].................................................
Associate
Dated 19 May 2016
Date(s) of hearing 28 April 2016 Applicant In person Solicitors for the Respondent Department of Human Services
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