Re Secretary, Department of Family and Community Services and Butt
[2000] AATA 623
•28 July 2000
DECISION AND REASONS FOR DECISION [2000] AATA 623
ADMINISTRATIVE APPEALS TRIBUNAL)
No N99/1578
GENERAL ADMINISTRATIVE DIVISION)
Re: SECRETARY TO THE DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Applicant
And: JULIANNA BUTT
Respondent
DECISION
Tribunal: Justice D F O'Connor, President Mrs H E Hallowes, Senior Member Dr J D Campbell, Member
Date:28 July 2000
Place:Sydney
Decision: The decision under review is set aside and the Tribunal remits the matter to the applicant with directions that: (a) the rate of family payment payable to Ms Butt be recalculated from 1 August 1996 in accordance with these reasons; (b) the amount of family payment since 1 October 1997 to which Ms Butt was not entitled is a debt due to the Commonwealth; and (c) recovery of the debt shall be waived under subsection 1237A(1) of the Social Security Act 1991.
. . . . . . . . . . . . . . . . . . . . . . . . . .
PresidentSOCIAL SECURITY — family payment — rate payable — whether respondent requested determination of rate using estimated income — whether income likely to exceed 110 per cent of base tax year income — re-calculation of family payment — whether notifiable event — appropriate tax year — whether recovery of debt should be waived
Social Security Act 1991 ss 6, 860, 861, 885, 886, 1069-H8, 1069-H13, 1069-H14,
1069-H15, 1069-H18, 1069-H19, 1069-H21, 1069-H22, 1223, 1237A, 1237AAD
Social Security (Administration) Act 1999 s 254
Social Security (Administration and International Agreements) (Consequential Amendments)
Act 1999
A New Tax System (Family Assistance) (Administration) Act 1999
A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No 1) 1999
Re Secretary, Department of Social Security and Jones (1998) 50 ALD 248
Re Secretary, Department of Social Security and Dyson [2000] AATA 306
Re Stuart and Secretary, Department of Social Security (1998) 54 ALD 241
REASONS FOR DECISION
Justice D F O'Connor, President Mrs H E Hallowes, Senior Member Dr J D Campbell, Member
Jurisdiction
The Secretary to the Department of Family and Community Services seeks review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 1 September 1999 under Chapter 6 Part 6.4 of the Social Security Act 1991 ("the Act"). By Act No 192 of 1999 the Social Security (Administration and International Agreements) (Consequential Amendments) Act 1999 commencing so far as relevant on 20 March 2000, Chapter 6 of the Act was repealed and new provisions with respect to applications for review of decisions of the SSAT came into effect under Division 5 of Act No 191 of 1999 the Social Security (Administration) Act 1999 ("the Administration Act"). Section 254 of the Administration Act provides:
254(1) If:
(a)a person made an application under section 1283 of the 1991 Act before 20 March 2000; and
(b)the application was not determined before 20 March 2000;
the application has effect, on and from 20 March 2000, as if it were an application under section 179 of this Act.
(2) The date of effect of the decision made in response to the application may be before 20 March 2000.
(3) If:
(a)subsection (1) applies to an application; and
(b)the date of effect of the decision made in response to the application is before 20 March 2000;
the decision has effect, for the period that starts on the date of effect of the decision and ends on 19 March 2000, as if it were a decision made under the 1991 Act.
The person referred to in s 254(1)(a) for the purposes of this application is the Secretary.
Decision under Review
The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the documents"), together with other material lodged by parties at the hearing. The applicant was represented by Mr J Walsh, an officer of Centrelink. Ms Butt was represented by Ms S Koller, a solicitor of the Welfare Rights Centre. The social security payment made to Ms Butt has changed its name and for convenience the Tribunal will refer to it as family payment throughout the period.
The decision the SSAT reviewed was a decision of a delegate of the agency, Centrelink, who exercised the power of the Secretary under the Act, now referred to as the Social Security Law, through delegations from the Secretary to the Chief Executive Officer of the Agency (section 234 of the Administration Act).
The delegate determined on 15 December 1998 that Ms Butt had been overpaid $3697.50 family payment during the period 1 August 1996 to 28 August 1997 and a further amount of $3298.40 for the period 11 September 1997 to 10 September 1998. By two separate letters both dated 4 January 1999, Ms Butt was advised:
. . .
Your Family Payment was assessed on a combined 1996/97 estimate of $28,650 from 29 July 1996 and was then reassessed on $32,452 from the 5 March 1997.
Your combined taxable income = $36,984. Since your estimates were incorrect by more than 10%, you have been overpaid Family Payment for paydays 1 August 1996 to 28 August 1997.
. . .
And further:
. . .
Your Family Payment was assessed on a combined 1997/98 estimate of $33,094 from 1 September 1997 and then was reassessed on $37,400 from 1 July 1998.
Your combined taxable income = $41,831. Since your estimates were incorrect by more than 10%, you have been overpaid Family Payment for paydays 11 September 1997 to 10 September 1998.
. . .
The rate of family payment payable is calculated for a calendar year, although it is a person's income for a tax year which is taken into account in determining the rate.
By letter dated 7 January 1999, Ms Butt advised the Secretary, amongst other things, that she believed that she
. . . was being extremely careful with my estimations to date . . . My biggest complaint is that this debt has been occurring since 1996. Many forms have been completed by me during this time and in good faith . . .
The determinations were reviewed by an authorised review officer ("ARO"). In a letter dated 23 February 1999 the ARO advised Ms Butt that she had used sections 885, 891 and 1223 of the Act. As there was not enough evidence on file for the estimate provided by Ms Butt for the period 1 August 1996 until 5 March 1997 to be used the ARO had calculated the overpayment from 5 August 1997 to 28 August 1997, the amount of that overpayment now being $1132.95.
The SSAT considered the determination of the delegate, as varied by the ARO, the debts totalling $4431.35 and decided to "set aside the decision and substitute a new decision that the Commonwealth's right to recover the debt is waived". The SSAT found that Ms Butt's actual combined taxable income during the relevant periods were as follows:
1995/96 $39,068
1996/97 $37,162
1997/98 $41,831
The SSAT also found that Ms Butt had provided estimates of taxable income in 1997 and 1998. For completeness, the Tribunal reproduces below an extract from the print out from the department's computer records of estimates made by Ms Butt during the relevant period, which were included in the documents:
Manual Effect Date Fin Year C/P Status Taxable Income
1 JAN 1996 1996 C P EST EST 2000 27000
29 JUL 1996 1997 C P EST EST 1650 27000
1 JAN 1997 1997 C P EST EST 1650 27000
5 MAR 1997 1997 C P EST EST 4000 28452
1 SEP 1997 1997 C P EST EST 11106 29568
1 SEP 1997 1998 C P EST EST 10467 22627
1 JAN 1998 1998 C P EST EST 10467 22627
25 MAY 1998 1998 C P EST EST 13900 23500
1 JUL 1998 1998 C P EST EST 10467 22627
The SSAT applied subsection 885(1) of the Act, which provided:
885 (1) If:
(a)in working out the rate of family payment payable to a person, regard is had to the person's income for a tax year; and
(b)the income to which regard was had consisted of an amount estimated by the person; and
(c)the person's income for that tax year is more than 110% of the amount of the income on which the determination of the rate of family payment was based;
the person's rate of family payment is to be recalculated on the basis of that income.
The SSAT noted that the income to which the Secretary had regard in calculating the rate of her family payment consisted of an amount estimated by Ms Butt. When actual figures were known, Ms Butt's combined income for the relevant financial years was more than 110 per cent of her estimates and the SSAT found that the correct decision was made to raise the debts under subsection 1223(3) of the Act which provided:
1223(3) Subject to subsection (4), if:
(a)an amount (the "received amount") has been paid to a person by way of family payment; and
(b)the person's rate of family payment is recalculated under:
(i)section 884 (amendment of assessable income); or
(ii)section 885 (underestimate of income); or
(iii)section 886 (failure to notify notifiable event);
… and
(c)the received amount is more than the amount (the "correct amount") of the family payment payable to the person;
the difference between the amount and the correct amount is a debt due to the Commonwealth.
After considering what was said by the Tribunal in Re Stuart and Secretary, Department of Social Security (1998) 54 ALD 241 and having noted what the Tribunal said in Re Secretary, Department of Social Security and Jones (1998) 50 ALD 248, the SSAT waived the right of the Commonwealth to recover the debts. The SSAT considered the effects of section 1069-H18 of the Act, which provided:
1069-H18. If:
(a)a notifiable event occurs in relation to a person; and
(b)the person's income for the tax year in which the notifiable event occurs exceeds:
(i)110% of the person's income for the base tax year; and
(ii)110% of the person's income free area;
the appropriate tax year, for the purpose of applying this Module to the person for the remainder of the family payment period, is the tax year in which the notifiable event occurs.
and the effects of section 1069-H21:
1069-H21 If:
(a)family payment:
(i)is not payable to a person because of this Module; or
(ii)is payable at a reduced rate because of this Module; and
(b)the person gives the Secretary an estimate of the person's income for a tax year; and
(c)the person requests the Secretary to make a determination under this point; and
(d)the person agrees that the person's rate of family payment for that tax year is to be recalculated if the person's actual income for that tax year exceeds 110% of the amount estimated by the person;
the Secretary must determine that the appropriate tax year, for the purpose of applying this Module to the person for a family payment payday on or after the day on which the request is made, is the tax year in which the request is made.
The SSAT found, following what was said in Re Stuart, that the respondent had not requested the Secretary to use her estimates and the SSAT was satisfied that the debts were attributable solely to administrative error. The debts were waived under section 1237A of the Act, which provided:
1237A(1) The Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
Note:Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
By operation of Social Security Legislation Amendment (Budget And Other Measures) Act, No 84 of 1996, section 1237A applies to debts arising before, on or after 1 October 1997.
Re Stuart and Jones and Relevant Legislation
It was the difference in approaches of the Tribunal as exemplified by reasons for decision in Re Stuart and Jones which the Secretary sought to have resolved in bringing this application for review.
In Re Stuart the applicant had provided the Secretary with estimates of income on forms she had completed with respect to her entitlement to family payment during 1994, 1995 and 1996. Until 1 January 1996, there was a 25 per cent margin for error allowable in the estimate before an overpayment occurred if actual income was greater than the estimate. That 25 per cent tolerance was reduced to a 10 per cent tolerance from 1 January 1996. The applicant in Re Stuart was advised that she would be paid family payment on the basis of her estimated income. Deputy President Forgie found that there was no evidence that Ms Stuart asked for her appropriate tax year to be changed from her base tax year (see Re Stuart at 251) although Ms Stuart was asked to provide estimates of taxable income. At paragraph 67 of her reasons for decision, Deputy President Forgie found that forms completed by Ms Stuart were not a request by her that her estimates be used to calculate a rate. The relevant base tax year was defined under section 1069-H12 but, since 1 January 1996, it has been defined under section 1069-H14.
The matter of Jones raised the issue of the rate of family payment payable during 1993 and 1994. Senior Member Muller found in Jones that, although there was no form specifically designed for the purpose of allowing a recipient of family payment to request that the rate be calculated by reference to an estimate of income, it was appropriate to treat the information supplied by Ms Jones in response to the Secretary's request for estimates as such a request as Ms Jones was sufficiently conversant with the system to realise that, when she completed the forms, she would be paid on the basis of her estimates.
It is useful here to refer to other relevant provisions of the Act, including those under Parts 2.17 and 3.7. The provisions, although amended during the relevant period, have not been changed in substance. They provided, as follows:
6(1) In this Act, unless the contrary intention appears:
. . ."family payment period", in relation to a person who is receiving family payment, means:
(a)in relation to the year in which the person first receives family payment — the period that starts on the day on which the person starts to receive family payment and ends on the next 31 December; or
(b)in relation to any other year — the period that starts on 1 January in that year and ends on 31 December in that year.
…
860 If the rate of the family payment payable to a person in a calendar year has been worked out in accordance with the Family Payment Rate Calculator the rate of family payment payable to the person only has to be worked out again during that calendar year if:
(a)the person notifies the Department or an officer that a notifiable event has occurred in relation to the person; or
(b)a notifiable event has occurred in relation to the person and the person fails to notify the Department that it has occurred; or
(c)the Secretary makes a determination in relation to the person under point 1069-H21 in Module H of the Family Allowance Rate Calculator in section 1069; or
(ca) family allowance advance is or is not payable for a particular period;
or
(d) the person revises an estimate of his or her income; or
(e) the person has underestimated his or her income; or
(f) the Commissioner of Taxation changes an assessment of the person's taxable income."861 The rate of family payment payable to a person or to an approved care organisation for an FP child is worked out using the Family Payment Rate Calculator at the end of section 1069.
Notes 1-3: (Omitted by No 106 of 1995, s 3(1), Sch 2(23).)
…886 If:
(a)a notifiable event occurs in relation to a person; and
(b)the person fails to notify the notifiable event in accordance with section 872; and
(c)(Omitted)
(d)the person's income for that tax year exceeds 110% of:
(i)the person's income for the tax year that is, when the event occurs, the person's base tax year; and
(ii)the person's income free area at that time;
the person's family payment rate is to be recalculated on the basis that the person's appropriate tax year is the tax year in which the notifiable event occurred.
Note 1:if the person notifies the notifiable event, the person's rate of family payment will be recalculated under section 860.
Note 2:for the date of effect of a determination giving effect to this point see sections 876 and 877.
Note 3:For income free area, see point 1069-H28.
Note 4:For base tax year, see point 1069-H14.
…
1069-H8.(1) A person's taxable income for a tax year is:
(a)the person's assessed taxable income for that year; or
(b)if the person does not have an assessed taxable income for that year — the person's accepted estimate of taxable income for that year.
…
1069-H13. Subject to the following provisions of this Submodule, the appropriate tax year for a family payment payday is the base tax year for that payday.
1069-H14. The base tax year for a family payment payday is the tax year that ended on 30 June in the calendar year that came immediately before the calendar year in which the payday occurs.
1069-H15. If:(a)family payment is payable to a person:
(i)on the last family payment payday in one calendar year; and
(ii)on the first family payment payday in the next calendar year; and
(b)the person's family payment rate on the last family payment payday in the earlier of the 2 calendar years is worked out on the basis that the person's appropriate tax year is the tax year in which the payday occurs (the current tax year); and
(c)the person's family payment rate on that payday was worked out on that basis because the person had made a request under point 1069-H21; and
(d)the person's income for the current tax year is less than the person's income for the base tax year;
the person's appropriate tax year, as from the beginning of the later calendar year, is the current tax year and not the base tax year unless the income for the base tax year is less than the person's income free area.
Note: For income see point 1069-H2.
. . .
1069-H19. If:
(a)a notifiable event occurs in relation to a person; and
(b)point 1069-H18 does not make the year in which the event occurs (the event tax year) the appropriate tax year; and
(c)the person's income for the tax year that follows the event tax year is likely to exceed:
(i)110% of the person's income for the base tax year; and
(ii)110% of the person's income free area;
the appropriate tax year, for the purpose of applying this Module to the person for:
(d)the part of the family payment period in which the event occurs that comes after the end of the event tax year; and
(e)the next family payment period after the one referred to in paragraph (d);
is the year that follows the event tax year.
Note: For income see point 1069-H2.
. . .
1069-H22. A request under point 1069-H21 must be made in writing in accordance with a form approved by the Secretary.
…1223(1) Subject to subsections (1A) and (1B), if an amount has been paid to a person by way of social security payment on or after 1 October 1997 and:
(a)the recipient was not qualified for the social security payment when it was granted; or
(b)the amount was not payable to the recipient;
the amount so paid is a debt due to the Commonwealth.
. . .1223(5) If:
(a)an amount (the "received amount") has been paid to a person by way of social security payment on or after 1 October 1997; and
(b)because the received amount had not been correctly calculated using the relevant rate calculator, or for any other reason, the received amount is greater than the amount (the "correct amount") of social security payment that should have been paid to the person under this Act;
the difference between the received amount and the correct amount is a debt due to the Commonwealth.
…1237AAD The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)the debt did not result wholly or partly from the debtor or another person knowingly:
(i)making a false statement or a false representation; or
(ii)failing or omitting to comply with a provision of this 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.
Note:Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth.
The Tribunal notes that under Schedule 4 of the ANew Tax System (Family Assistance) (Consequential and Related Measures) Act(No 1) 1999, Part 2.17 and Part 3.7 of the Act are repealed with effect from 1 July 2000 and that under the A New Tax System (Family Assistance) (Administration) Act 1999 new provisions have been substituted, including provisions with respect to the determination of a rate based on an estimate, section 20 providing:
20(1)If:
(a)an individual's rate of family tax benefit is required to be calculated for the purpose of making a determination under this Division; and
(b)information about an amount needed for the calculation of the rate is not available (for example, because the taxable income of the individual or another individual cannot be known until after the end of the relevant income year); and
(c)the individual gives the Secretary an estimate of the amount needed; and
(d)the Secretary considers the estimate to be reasonable;
the Secretary may determine the individual's rate of family tax benefit on the basis of the estimate.
Deputy President Forgie revisited the issue of the rate of family payment payable and whether estimates should be used to calculate a rate in Re Secretary, Department of Family and Community Services and Dyson [2000] AATA 306 (20 April 2000). The calendar years 1996, 1997 and 1998 were in issue in that matter as they are in this application. Deputy President Forgie considered the operation and inter-relationship of sections 1069-H18, 1069-H19 and 885. She set out the legislative framework from paragraph 25 of her reasons for decision, including sections 1069 and 884, with respect to the calculation of the rate of family payment payable.
Generally, the appropriate tax year to be considered when determining a claimant's income in order to determine the rate of family payment payable for a calendar year is the income for the tax year ending on 30 June the year before. It is referred to as the "base tax year" (defined in section 1069-H13, later defined in section 1069-H14). However, if a "notifiable event" occurs, and income in the calendar year in which the notifiable event occurs exceeds 110 per cent of the base tax year income or is likely to exceed that amount, the base tax year changes to the notifiable event year (sections 1069-H18 or 1069-H19). When the notifiable event occurs, actual taxable income may not be known, preventing an assessment under section 1069-H18. A person may give the Secretary an estimate of income for a tax year and in writing request the Secretary to use the estimate in order to calculate a rate of family payment. However, if a person anticipates a decrease in income, they can ask the Secretary to use an estimate of future income to increase the rate of family payment payable. On the other hand, if an event occurs which means that their income exceeds or is likely to exceed their base tax year income, the Secretary wants to know so that the rate of family payment payable can be reduced and recipients are not faced with a debt to repay to the Commonwealth. In the matter of Dyson it was submitted that the effect of a "notifiable event" was to only extend the use of the notifiable event tax year income to calculate a rate to the end of that calendar year and that from the following 1 January the Secretary should determine the rate again using the base tax year.
Mr Walsh also appeared for the Secretary in the matter of Dyson. Deputy President Forgie did not accept his approach that Module H could be revisited and reapplied to Ms Dyson on the basis of her actual "income for the appropriate tax year as it varied from time to time" when known. Deputy President Forgie said that this approach ignored the provisions of the legislation (paragraph 43 of her reasons for decision). She noted that section 1069-H19 provides for the situation where a person's income for the tax year following the notifiable event tax year "is likely to exceed" certain predetermined limits. She went on to say, at paragraph 45:
Whether his or her income was likely to exceed those limits must be assessed objectively on the basis of the information that was known to the person at the time that the notifiable event occurs or that it was reasonable to expect that he or she should have known at that time. . . . The income that the person actually received is simply part of the factual pattern but is not determinative of the issue.
Turning to section 1069-H18, Deputy President Forgie said, at paragraphs 46 and 49, so far as relevant:
As the provision requires regard to be had to a person's actual income for the event tax year and as assessed taxable income for the event tax year can never be known at the time that the event occurs, it follows that an estimate of that income must always be used initially.
. . .49. It follows from this analysis that I have concluded that Module H permits a person's entitlement to family allowance to be reassessed using a person's actual taxable income once it is known but only in so far as the module permits. It does not permit point 1069-H19 to be re-visited using a person's actual income and for his or her entitlement to be reassessed in light of that income.
In Dyson a notifiable event occurred on 19 September 1996. An assessment therefore had to be made whether Ms Dyson's income for that event tax year, ending 30 June 1997, exceeded 110 per cent of her income for the base year 1994/1995. As the 1996/1997 tax year had not concluded, Ms Dyson provided an estimate. When actual figures were known section 885 provided that Ms Dyson's rate of family payment be recalculated on the basis of her income for that tax year. Actual figures exceeded her estimate by 110 per cent. The Tribunal found that the appropriate tax year for the remainder of the 1996 calendar was therefore the tax year 1996/1997 (Dyson at paragraph 53). However, once the calendar year 1997 commenced, the appropriate tax year reverted to the base tax year ending 30 June 1996. She observed that section 1069-H19 only came into consideration if section 1069-H18 did not alter the appropriate tax year.
EvidenceTurning to Ms Butt's circumstances, Mr Walsh contended that Ms Butt had contributed to her debt because she had underestimated her income. He called Ms H Schuster, an officer with Centrelink, who had responsibilities with respect to family payments during the relevant period. Ms Schuster outlined relevant income free thresholds entitling a person to a maximum rate of family payment after which the rate tapers, until a ceiling is reached above which there would be no entitlement. She gave evidence that recipients are only asked to provide estimates on end of year review forms which are sent to recipients between October and December each year. Having considered the forms completed by Ms Butt, she "assumed" Ms Butt had sought an increase in her family payment rate and therefore the Secretary had been asked to use an estimate, referring to the document indexed at T10 of the documents, which was a Family Payment Request for Income and Assets Details which Ms Butt had signed on 10 February 1997. Ms Schuster said that different forms were used in April and July from the forms used for end of year reviews. The end of year review forms are used to update information to calculate a rate for the following year.
Ms Butt has four children, born on 12 July 1989, 22 March 1991, 7 April 1993 and 1 February 1996. Ms Butt gave evidence that she has undertaken casual employment, on and off, during the last eight years. The family moved to a new address in 1995 and she started work after a break from employment of 11 months following the birth of her youngest child, Sebastian. She returned to casual employment in January 1997. Her husband became self-employed, having bought a business. She filled in all Centrelink forms to the best of her ability, estimating her income as best she could. She tried to anticipate the number of shifts she may work as a midwife and she obtained figures from her husband's accountant before completing forms. There was an unanticipated increase in her income during the financial year ending 30 June 1997, as she discovered during that financial year that she was being paid as a first year nurse rather than as a midwife and she received a back payment of the amount she should have been paid which amounted to a few thousand dollars. She said she would have notified Centrelink of this further income "because I'd know that an amount like that would affect my estimate". She telephoned Centrelink quite often. Sometimes she received contradictory advice from Centrelink. She was aware that her estimates had been used to calculate rates of family payment. She thought that her most recent information would be used to calculate a rate and she did not think that she would be paid the wrong amount. She was not aware of a "base year", rather, she was told that as she was a casual employee calculations of her rate of family payment would be based on estimates. She had no recollection of applying for a higher rate of family payment. She did not understand that she had a choice whether the Secretary used an estimate or her base tax year income to calculate her rate of family payment.
Ms Butt explained that in early 1996 when her son Sebastian was born, she anticipated that she would not earn much income. She had a discussion with "Nikki", an officer of Centrelink, in March 1997 about an overpayment of family payment for an earlier period. At the discussion with the officer it was not explained to her that calculations of the rate of family payment could be done on a basis other than estimates. She recollected that she had worked for 11 weeks during the "measles campaign" in mid-1996 for $150 per week. She said she advised Centrelink about that income. She recollected that her parenting allowance was cancelled as a result.
Ms Butt said that, after her husband bought a business, their income dropped in early 1997. Mr Walsh contended that when there was a drop in Ms Butt's income, Ms Butt had asked Centrelink for an increase in family payment based on her estimates as her combined taxable income would be lower, and that she had, in effect, asked for her estimates to be used. Mr Walsh drew Ms Butt's attention to the advice on the form she signed on 12 August 1997, reproduced below:
If your actual income is 10% more than your estimate, you may have to repay any overpayment of Family Payment and/or Childcare Assistance.
Ms Butt said that she understood this advice. Mr Walsh also noted the advice to Ms Butt from the Secretary in letters that her family payment had been worked out using her estimate. Ms Butt said she tried to be diligent,
. . . I even went as far – my husband could have got some extra money out of the business, the way it ended up at the end of the financial year. I don't really understand how it works but the accountant wanted him to have some extra money and I said no, because it will muck up our estimates and my husband's business partner was really cranky and his wife had just had a baby and Linda said: go on, we could use this money and everything and I said: Linda, the same thing will happen to you. It will muck it all up because she was the same, she'd – receiving the family payments and she didn't understand it and we had – my husband and I had the worst fight over it and because I knew that I had to be so careful. . . .
Secretary's contentions
Mr Walsh put to the Tribunal that Deputy President Forgie's approach to the issue of the application of estimates for calculating rate of family payment is "narrow or technical". He described it as a "literal approach" denying recipients access to a higher rate of family payment if they are not "sophisticated in the scheme". Mr Walsh did accept that there was force in the Tribunal's observation that the statutory scheme provided that a "request" be made and that a system involving an explicit request, rather than that an inferred request, should be in place. Mr Walsh contended that in Ms Butt's circumstances the information she supplied could be characterised as "a request" and, even if no request had been made under the Act by Ms Butt for her estimate to be used, sections 885 and 1223(3) must apply.
Mr Walsh also commented on recipient notification notices sent to Ms Butt on 5 March 1997, 5 September 1997 and 15 December 1998 and the events Ms Butt was obliged to tell the Secretary about, including whether she or her partner was self-employed or, if she was paid on an estimate, whether their combined taxable income was likely to be more than $35,697.20 for the 1995/1996 tax year or, in the second notice $36,403.40 for the 1996/1997 tax years and the same figure for the 1997/1998 tax year. On 23 June 1998 Ms Butt was notified that she must advise the Secretary if her income would be more than $41,140.00 in the 1997/1998 tax year.
In determining any overpayment Mr Walsh put to the Tribunal that it is the difference between family payment calculated on the basis of an estimate and what should have been paid based on actual figures which provides the amount of overpayment. Ms Koller contended that any debt is the difference between what should have been paid using Ms Butt's base tax year income and what was actually paid. Mr Walsh noted that, if section 1069-H18 does not apply because any notifiable event does not result in a recipient's income exceeding more than the variation allowed from the recipient's base tax income year, section 1069-H19 provides that the likely effect of the notifiable event on the next tax year's income must be considered. This was the issue considered by Deputy President Forgie in Dyson.
Respondent's ContentionsMs Koller drew the Tribunal's attention to the Centrelink Question Guide and Ms Butt's answer sheet, completed on 1 November 1997 in which question 7 asks:
Have any of the changes listed below happened to you . . . since 30 June 1997 that you have NOT ALREADY TOLD US about?
. . .
you . . . are self employed and your combined taxable income is likely to go up
your income in 1997/98 will be less than your income in 1996/97 and you wish to have your Family Payment and/or Childcare Assistance assessed on your 1997/98 income
(This may have happened because you stopped work, reduced your hours of work, took leave without pay or separated)
Ms Butt did not respond to this question on her answer sheet.
It was Ms Koller's contention that matters in issue started from 5 March 1997 when a notifiable event occurred. The Tribunal notes that the original decision was that Ms Butt had been overpaid family payment from 1 August 1996 to 28 August 1997 and for the period from 11 September 1997 to 10 September 1998. Ms Koller put to the Tribunal that the Secretary, in advising Ms Butt when she needed to contact the Secretary, had provided figures to Ms Butt which were 10 per cent above her estimate. Ms Koller contended Ms Butt understood that it was not until the figure provided was reached, that she was required to notify the Secretary. She put to the Tribunal that there was no basis on which Ms Butt's base tax year should have changed during the relevant periods. She argued that section 885 of the Act did not stand alone to empower the Secretary to recalculate the rate of family payment without reference to section 1069 because, if that was so, it would make section 1069-H21 otiose. Ms Koller said that section 885 only applied when there was a request in writing for an estimate to be used under section 1069-H21. Ms Koller further contended that, if Ms Butt had been overpaid family payment, she had received those payments in good faith.
FindingsIn December 1998 when considering Ms Butt's rate of family payment as from 1 August 1996, the delegate noted that Ms Butt's rate was then based on an estimate. Subsection 1223(3) was applied. The Tribunal finds that Ms Butt provided estimates of income to the Secretary as requested from time to time. She was aware that estimates were used to calculate her rate of family payment. She was unaware that she could have chosen not to provide estimates. The meaning of section 1069-H21 is clear. A recipient must request in writing that a determination be made recalculating entitlement to family payment using an estimate provided. The person must agree that the person's rate of family payment for that tax year is to be recalculated if the person's actual income for that tax year exceeds 110 per cent of the amount estimated by the person (subsection 1069-H21(d)), that is, the person agrees to a recalculation being done in the future when actual figures are known. If the above request is made, and agreement is given, the base tax year changes to the tax year in which the request is made. However, the recalculation only has effect if the actual income exceeds 110 per cent of the amount estimated. The Tribunal finds that Ms Butt did not make a written request that the Secretary use her estimate. She was doing no more than providing estimates as requested by the Secretary. She did not know that she had a choice in the matter.
Relying on Ms Butt's Income and Assets Form lodged on 5 March 1997, the Tribunal finds that in March 1997 a notifiable event occurred. That issue was not in dispute. The Tribunal is satisfied that until that time Ms Butt's family payment should have been calculated using her base tax year income, that is, her income for the year ending 30 June 1996 ($39,068).
Section 1069-H18 provided that after the notifiable event and for the rest of the family payment period, the appropriate tax year may be the year ending 30 June 1997, but only if subparagraphs (b)(i) and (ii) were satisfied. That could only be determined when Ms Butt's accountant had lodged the relevant returns and assessments had been made by the Commissioner of Taxation which was, at the time, unlikely to be until October 1997. With the benefit of hindsight, it is now known that Ms Butt's actual income for the notifiable event year, 1997 ($37,162.00) did not exceed, in fact was less than, her income for the base tax year 1996 ($39,068.00). Even if an estimate was to be used, Ms Butt was estimating a decrease, not an increase, in her income. When the delegate made the decision, section 1069-H18 was not applicable. Turning to section 1069-H19, Ms Butt's income for the tax year (June 1998), which follows the event year (June 1997), was not "likely", on her estimate, to exceed her base tax year income, therefore section 1069-H19 did not apply to change the relevant year from the base tax year. If a recipient advises the Secretary that their taxable income is "likely" to exceed their base year income by 10 per cent, the Secretary must use the estimate if asked to by the recipient for the rest of the period to calculate a rate of family payment. Ms Butt could have asked for her estimate to be used under section 1069-H21 but she did not.
The Tribunal finds that Ms Butt was entitled to be paid family payment at a rate based on her base tax year income as she did not ask the Secretary in writing to use her estimate in order to determine a rate applying section 1069-H21. Although notifiable events occurred during the relevant period, Ms Butt's income for the tax year in which the notifiable event occurred was then not available to the Secretary to decide if it exceeded the tolerance allowed, nor, on her estimates, was it likely to exceed 110 per cent of her income for the base tax year. Section 1069-H18 can now be applied but not section 1069-H19. That provision cannot be revisited (see Dyson). If the base tax year changes in order to calculate a rate, it only changes until the end of the family payment period, the calendar year (Dyson).
Ms Koller contended that subsection 885(1) of the Act would not apply if Ms Butt's entitlement had been correctly assessed "in the first place". The Tribunal accepts her contention that the Secretary has calculated the rate of family payment incorrectly since, as she put to the Tribunal, March 1997. However, the Tribunal finds that the Secretary has calculated it incorrectly since August 1996. Paragraph 885(1)(a) refers to the working out of a rate of family payment (under section 861, the Family Payment Rate Calculator at the end of section 1069 is to be used), but only if regard was had to an estimate. Similarly, subsections 860(d) and (e) provide for estimates but no request was made for their use in this matter. Estimates were used but without a request being made under section 1069-H21 and, as Ms Koller contended, section 885 has no work to do in this matter in light of the Tribunal's findings and directions.
Ms Butt underestimated her income but the rate of family payment payable was not worked out in accordance with section 1069. The Tribunal will therefore set aside the decision of the SSAT and remit the matter to the Secretary with directions that the rate of Ms Butt's entitlement to family payment be calculated using her base tax year income and applying section 1069-H18, actual figures now being known.
As the decision under review is set aside, and as it is directed that Ms Butt's entitlement to family payment be calculated again, no administrative error should occur. There may remain however monies in Ms Butt's hands to which she is not entitled, the Secretary having incorrectly applied the Act to her circumstances when originally calculating the rate of family payment. How much money Ms Butt has been paid due to administrative error over and above that to which she was entitled will not be known until new calculations are made. The Tribunal accepts Ms Koller's contention that any debt which may arise is the difference between what should have been paid to Ms Butt using her base tax year income and what she has already been paid. Recalculations are not being done under subparagraph 1223(3)(b)(ii), regard no longer being had to an estimate. Subsection 1223(3) does not apply. Turning to subsections 1223(1) and (5) it is only the amount overpaid after 1 October 1997 which is a debt due to the Commonwealth. Family payment is a social security payment.
Subsection 1237A(1) provides that the Secretary, and on review this Tribunal, must waive the right of the Commonwealth to recover the debt attributable solely to administrative error if the payment is received in good faith. Ms Butt's evidence and the documents before the Tribunal satisfy it that the payments were received by Ms Butt in good faith. The Tribunal finds that Ms Butt thought that the legislation was being correctly applied to her, that she complied with the Secretary's notices and that she provided estimates to the Secretary when asked. Recipients in those circumstances, understanding their payments to be correct, budget for and spend those payments accordingly. Mr Walsh put to the Tribunal that Ms Butt's inaccurate estimates of income contributed to the debt and that she lacks good faith because it was her own employment income which caused her estimates to be incorrect. However, those estimates should not have been used. Ms Butt did not contribute to the administrative error. She did not ask for her estimates to be used. She estimated her income to the best of her ability when asked to do so. She received the payments of family payment in good faith not being aware that the Act provided for her family payment to be calculated on a different basis. Any debt which may arise following recalculation shall be waived under subsection 1237A(1) of the Act.
I certify that the 32 (thirty-two) preceding paragraphs are a true copy of the reasons for the decision herein of the Hon Justice D F O'Connor, President, Mrs H E Hallowes, Senior Member and Dr J D Campbell, Member.
Signed: .....................................................................................
AssociateDate/s of Hearing 11 April 2000
Date of Decision 28 July 2000
Advocate for Applicant Mr J Walsh
Solicitor for Respondent Ms S Koller, Welfare Rights Centre
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