Re Secretary, Department of Family and Community Services and Dyson
[2000] AATA 306
•20 April 2000
CATCHWORDS – SOCIAL SECURITY – family allowance – overpayment – whether debt arises – effect of notifiable event – application of sections 1069-H18; 1069-H19; and 885 – effect of recalculation of appropriate tax year – whether notifiable event can apply to two consecutive tax years – decision varied.
Social Security Act 1991 – Ss 860, 872, 873, 874, 875, 876, 877, 878, 879, 880, 881, 881A, 884, 885, 891, 1069, 1223, 1237AAD
Beadle v Director-General of Social Security (1985) 60 ALR 225; (1985) 7 ALD 670
Groth v Secretary, Department of Social Security (1995) 40 ALD 541; (1996) 2 SSR 102
Re Vulcan Australia Pty Ltd and Comptroller-General of Customs (1994) 34 ALD 773; (1994) 20 AAR 116
DECISION AND REASONS FOR DECISION [2000] AATA 306
ADMINISTRATIVE APPEALS TRIBUNAL )
) Q 1999/557
GENERAL ADMINISTRATIVE DIVISION )
ReSECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Applicant
AndMARIE DYSON
Respondent
DECISION
Tribunal Miss S A Forgie (Deputy President)
Date 20 April, 2000
Place Brisbane
Decision The Tribunal:
1.affirms the decision of the Social Security Appeals Tribunal in so far as it determined that:
(a)a debt in the sum of $542.80 exists in relation to the period 10 October, 1996 to 19 December, 1996; and
(b)there is no debt in relation to the period 1 January, 1997 to 31 December, 1997; and
2.decides that the debt in the sum of $542.80 in relation to the period 10 October, 1996 to 19 December, 1996 may not be waived; and
3.sets aside the decision of the Social Security Appeals Tribunal in so far as it found that there was a debt in relation to the period 1 January, 1998 to 10 September, 1998 and waived that debt and substitutes a decision that:
(a)the decision of the respondent made on 21 September, 1998 and affirmed on 28 January, 1999 in so far as it relates to the period 1 January, 1998 to 10 September, 1998 be set aside; and
(b)there is substituted for that decision a decision that there was no debt in relation to the period 1 January, 1998 to 10 September, 1998.
S A FORGIE
Deputy President
REASONS FOR DECISION
On 19 May, 1998, the applicant, the Secretary of the Department of Family and Community Services ("Secretary") applied for review of a decision of the Social Security Appeals Tribunal ("SSAT") dated 12 April, 1999 to vary decisions made by two of his delegates. The first decision, made on 2 September, 1998, had been to raise and recover an amount of $1,895.60 on the basis that it had been overpaid to the respondent, Mrs Marie Dyson, as family payment during the period 10 October, 1996 to 19 June, 1997. The second decision, made on 21 September, 1998, had been to raise and recover an amount of $5,152.50 on the basis that it had been overpaid to Mrs Dyson as family allowance during the period 3 July, 1997 and 10 September, 1998. Both decisions had been affirmed by an Authorised Review Officer; the first on 23 December, 1998 and the second on 28 January, 1999.
The effect of the SSAT's decision was that, in relation to the first decision, Mrs Dyson owed a debt of $542.80 for the period 10 October, 1996 to 19 December, 1996 only. In relation to the second decision, there was no debt for the period 3 July, 1997 to 31 December, 1997. A debt remained for the period 1 January, 1998 to 10 September, 1998 but recovery of that debt was waived.
At the hearing, the Secretary was represented by Mr Walsh, an advocate with Centrelink, and Mrs Dyson was represented by her solicitor, Ms Bolton. The documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("T documents") were admitted in evidence together with copies of letters written by a Regional Manager of the Department and dated 16 February, 1995 and 16 December, 1996 and a statement made by Mrs Dwyer, an advocate with Centrelink. No oral evidence was given on behalf of either party.
THE ISSUE
There are two issues. The first, whether an overpayment of family allowance was made to Mrs Dyson in relation to each of two periods. That involves a consideration of the operation and inter-relation among points 1069-H18 and 1069-H19 and s. 885 of the Social Security Act 1991 ("the Act"). The second issue is whether, if there was an overpayment, it should be waived.
BACKGROUND
There was no dispute as to many of the facts leading to the application. In view of that, and in light of the written evidence, I have made a number of findings of fact that I will set out in the following paragraphs.
I find that Mrs Dyson was born on 31 December, 1953. As at 16 February, 1995, I find that she had five children in respect of whom she was paid family payment (later known as family allowance). Additional Family Payment was also paid to her at that time. When Mrs Dyson's husband transferred from Jobsearch Allowance to Newstart Allowance, a Regional Manager notified Mrs Dyson of her entitlement to family payment, additional family payment and rent assistance in a letter dated 16 February, 1995 (part of Exhibit C). That letter went on to advise her that, under s. 872 of the SS Act, she was required to tell the Department within 14 days if certain specified events occurred, or were likely to occur. Among the events specified was her return to work or her husband's return to work. If she was paid on an estimate, she was to notify the Department if the combined income of her and her husband was likely to be more than $30,245.00.
Mrs Dwyer has had two years' experience as a supervisor in the Family Payment section and seven years' experience in the Department generally. In her written statement, Mrs Dwyer said that the Department's records showed that a letter was sent to Mrs Dyson on 19 March, 1996. That letter was intended to advise Mrs Dyson that she was to be paid an increased amount of rent assistance due to an increase in the CPI. No copy of that letter had been located in the Department's records but Mrs Dwyer said that it was the Department's normal practice to issue such a letter with notification provisions similar to those I have described in relation to the letters summarised in the preceding and following paragraphs. In light of Mrs Dwyer's evidence and Ms Bolton's acceptance that the letter was indeed sent, I find that a letter of the type described by Mrs Dwyer was sent to Mrs Dyson on 19 March, 1995.
On 19 September, 1996, Mrs Dyson advised the Department that her husband had started full-time work on 16 September, 1996 (T documents, page 33). The Department followed that notification with a letter to Mrs Dyson dated 23 September, 1996 (T documents, pages 34-36). She was advised that she would be paid $128.50 each fortnight as family payment in respect of her five children and she would be paid from 10 October, 1996. Once again, she was notified of the events of which she had to notify the Department within 14 days if they happened, or were likely to happen. One of those events occurred if she and her husband received income exceeding $27,660.60 in the 1995/96 or 1996/97 tax years.
On 16 October, 1996, Mrs Dyson returned to the Department a form entitled "Family Payment/Childcare Assistance Request for Income and Asset Details" (T documents, page 37-38). In that form, she advised that she did not receive any taxable income during 1994/95 but her husband received $18,672.00. When asked whether she or her husband had started work during the tax years 1995/96 or 1996/97, she noted that he had done so on 16 September, 1996. At question 6, Mrs Dyson was advised that the Department might use her most recent income if her combined taxable income had changed since the 1994/95 tax year. The question then went on to ask her to estimate her taxable income, and that of her husband, for the 1996/97 tax year. She was also advised that "income" includes taxable income from Government pensions or benefits. Mrs Dyson estimated that her husband would earn $23,000.00. At the conclusion of the question, Mrs Dyson was told:
"If your actual income is more than 10% higher than your estimate for 1996/97 you may have to repay any overpayment that results." (T documents, page 38)
At the same time as she lodged the completed questionnaire, two of Mr Dyson's payslips were given to the Department together with a copy of a notice of assessment addressed to Mr Dyson from the Australian Taxation Office ("ATO") for the tax year 1994/95 and a notice addressed to Mrs Dyson from that office and in relation to the same year (T documents, pages 39-41). The notice of assessment showed Mr Dyson's taxable income to be $18,672.00 and the notice addressed to Mrs Dyson showed her taxable income to be $5,274.00.
In view of the information it received in the questionnaire and in the supplementary documents, the Department re-assessed Mrs Dyson's entitlement to family payment. She was re-assessed on the basis of her estimate of her combined 1996/97 taxable income. On 24 October, 1996, the Department wrote to Mrs Dyson and told her that the amount of her family payment depended upon the combined income she and her husband received. It asked her for details relating to their income in the tax year 1995/96 and did so by asking her to respond to specific questions (T documents, pages 42-46).
The Department reassessed Mrs Dyson's entitlement to family payment on the basis of her estimate that her combined income in 1996/97 would be $23,000.00. It advised her in a letter dated 25 October, 1996 that she would be paid $578.90 in respect of her five children with effect from 7 November, 1996 (T documents, pages 47-49). That payment comprised $480.50 as family payment and $98.40 as rent assistance. She would also be paid arrears amounting to $900.80. The letter stated that the combined income used to work out her rate of family payment was $23,000.00.
In a letter dated 19 November, 1996, Mr and Mrs Dyson's accountants responded to the Department's letter of 24 October, 1996 (T documents, page 50). He advised that no taxation returns had been lodged for Mr and Mrs Dyson for the tax year 1995/96 as their earnings were below taxable limits. Mrs Dyson had received $5,671.00 and Mr Dyson had received $7,317.00.
The Department wrote to Mrs Dyson on 23 November, 1996 advising her that she would be paid $578.90 for her five children from 5 December, 1996 (T documents, page 53). That payment was made up of $480.50 for family payment and $98.40 for rent assistance. It then stated: "We can pay you Family Payment again." and went on to tell her to read the back of the letter for information about the income used to work out her entitlement. The income used was $23,000.00.
In a letter dated 13 December, 1996, the Department advised her that she would be paid $606.90 from 19 December, 1996 (T documents, pages 54-56). That payment comprised $508.50 for family payment and $98.40 for rent assistance.
In 1997, the income free area for a person with five children was $25,846.00.
A further letter from the Department dated 16 December, 1996 advised Mrs Dyson that she would be paid $622.70 each fortnight and that the payment comprised $524.30 for family payment and $98.40 for rent assistance. A figure of $12,988.00 had been used as Mrs Dyson's combined rate of income is assessing the amount to which she was entitled. Mrs Dyson was required to notify the Department if the amount of combined income of her and her husband exceeded $28,430.60 in the 1995/96 or 1996/97 tax years rather than $27,660.00 (Exhibit B).
On 9 March, 1997, the Department wrote to Mrs Dyson regarding family tax payment (T documents, pages 57-59). She would be paid $38.50 from 27 March, 1997 for her five children. The income used to assess her family tax payment was $12,988.00.
On 7 June, 1997, the Department sent to Mrs Dyson a form headed "Income and Assets". She returned that to the Department on 24 June, 1997. In that form, she was again asked, at question 9, whether she or her partner had started or recommenced work. She did not answer that question but answered the question whether her husband had changed jobs in the affirmative. She noted that he had done so on 16 September, 1996. At question 11, she was told that, because of the change in her circumstances indicated at question 9, the Department "… need[ed] more details about your taxable income for the financial year (1 July to 30 June) in which the change happened (1996/97 or 1997/98)" (T documents, page 65). Mrs Dyson showed a figure of $24,500.00 as the estimated taxable income her husband would receive in the tax year 1996/97. She wrote a figure for his taxable income under the heading of the tax year 1997/98 but then crossed it out.
On 9 July, 1997, the Department wrote to Mrs Dyson and asked her to complete the highlighted sections of the Income and Assets form. The highlighted sections included an estimate of taxable income for the tax year 1997/98. Mrs Dyson returned the form on 17 July, 1997 with an estimate of $29,000.00 for her husband's taxable income in 1997/98 (T documents, page 75).
On 1 August, 1997, the Department wrote to Mrs Dyson and told her that she would be paid $562.45 for her five children from 14 August, 1997 (T documents, pages 79-81). That payment was made up of $475.85 for family payment and $86.60 for rent assistance. The income used to work out her family payment was $29,000.00. The Department went on to tell her that she should tell it of her taxable income, and that of her husband, when they received their notices of assessment from the ATO. Its request was made under s. 873 of the Act, it went on to tell her.
On 20 November, 1997, Mrs Dyson completed a questionnaire entitled "Review of your Family Payment and Childcare Assistance" (T documents, pages 82-95). If she and her husband had lodged taxation returns for 1996/97, Mrs Dyson was asked to write the taxable income as shown on their notices of assessment or on their taxation returns. Mrs Dyson showed the figure of $29,610.00 as her husband's taxable income (T documents, page 94).
On 2 September, 1998, the Department assessed that Mrs Dyson had been overpaid family payment between 10 October, 1996 and 19 June, 1997 in the amount of $1,895.60 (T documents, page 111). The reassessment, made pursuant to s. 885, proceeded on the basis that Mrs Dyson's family payments in that period were assessed on the basis of her estimate of $23,000.00 as her combined taxable income for the tax year 1996/97. As her taxable income as assessed by the ATO was more than 110% of her estimated income, her entitlement was reassessed.
Mrs Dyson lodged a copy of a notice of assessment from the ATO setting out her husband's taxable income for the tax year 1997/98. The taxable income shown was $37,012.00 (T documents, page 118). She was sent, and completed, a form entitled "Changes to your Income and Assets" (T documents, pages 119-126). No changes in her circumstances were indicated on the form.
The Department noted that Mrs Dyson's combined income for 1997/98 was $37,012.00 but that she had estimated that it would be $29,000.00. As her actual income was more than 110% of her estimated income, the Department reassessed her entitlement to family payment pursuant to s. 885 of the Act. It calculated that the sum of $5,152.50 had been overpaid to her as family payment between 3 July, 1997 and 10 September, 1998 (T documents, pages 130-131).
LEGISLATIVE FRAMEWORK
I will set out the provisions as they relate to family allowance although there are no changes of substance from those applying to a family payment. A person's qualification for a family allowance is set out in Subdivision A of Division 2 of Part 2.17 of the Act. Subject to those criteria regarding income, there has been no question in this case that Mrs Dyson has been qualified for a family allowance. The rate of family allowance is determined by using the Family Allowance Rate Calculator at the end of s. 1069. Once the rate has been determined in accordance with that rate calculator:
"… the rate of family allowance 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." (s. 860)
A determination that family allowance is payable to a person continues in effect until it ceases to be payable under either ss. 875 or 876 (relating to complying, or failing to comply, with notification requirements under s. 872) or a further determination in relation to the payment has been made under ss. 880, 881 or 881A (relating to cancellation or suspension) and taken effect (s. 874(1)). A determination of the rate of family allowance continues in effect until it becomes payable at a lower rate under s. 877 or a further determination made under ss. 878 or 879 has taken effect (s. 874(2)). Sections 884, 885 and 886 provide that a person's rate of family allowance may be recalculated in certain circumstances and I will refer to these below (see paragraphs 35 to 37).
Module A, which is found at the end of s. 1069, sets out the method of calculating the rate of family allowance payable to a person. An essential step in that calculation is to work out the person's appropriate tax year. Subject to certain qualifications which I will come to shortly, the "appropriate tax year for a family payment payday is the base tax year for that payday" (point 1069-H13). 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.
Example:A family allowance payday occurs on 25 January 1995 - this day occurs in the calendar year 1 January 1995 to 31 December 1995 - the calendar year that came immediately before this one is the calendar year 1 January 1994 to 31 December 1994- the base tax year is the tax year that ended on 30 June 1994 (i.e. the year of income that commenced on 1 July 1993)." (point 1069-H14)
A change to what is a person's appropriate tax year may occur in various circumstances. One such circumstance occurs 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 purposes of applying this Module to the person for the remainder of the family allowance period, is the tax year in which the notifiable event occurs." (point 1069-H18)
The "family allowance period", in relation to a person who is receiving family allowance means:
"a)in relation to the year in which the person first receives family allowance – the period that starts on the day on which the person starts to receive family allowance 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." (s. 6(1)).
A "notifiable event" is defined in point 1069-H6 in the following terms:
"An event is a notifiable event for the purposes of the application of this Module in respect of a person if a notice given to the person under subsection 872(1) states that the event is a notifiable event for the purposes of this Module."
A notifiable event may occur but not have effect under point 1069-H18 to make the year in which the event occurs ("the event tax year") the appropriate tax year. Regard must then he had to point 1069-H19 which provides:
"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 purposes of applying this Module to the person for:
(d)the part of the family allowance payment period in which the event occurs that comes after the end of the event tax year; and
(e)the next family allowance period after the one referred to in paragraph (d);
is the year that follows the event tax year."
A recipient of family allowance may ask that the appropriate tax year be changed. That is provided for in point 1069-H21:
"If:
(a)family allowance:
(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 allowance for that tax year is to be recalculated if the person's actual income for that 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 allowance payday on or after the day on which the request is made, is the tax year in which
the request is made."
Point 1069-H22 provides that a "... request under point 1069-H21 must be made in writing in accordance with a form approved by the Secretary."
Point 1069-H15 relates to the appropriate tax year where a person is entitled to be paid family allowance for consecutive years. It too is dependent upon that person's making a request under point 1069-H21. It provides:
"If:
(a)family allowance is payable to a person:
(i)on the last family allowance payday in one calendar year; and
(ii)on the first family allowance payday in the next calendar year; and
(b)the person's family allowance 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 allowance rate on that payday was worked out on that basis because the person had made a request under point 1069-
H-21; 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."
A person's income is relevant in determining the amount of family allowance payable to him or her. Point 1069-H2 provides that a person's family payment income for a particular tax year is the sum of four income components: taxable income; adjusted fringe benefits value; target foreign income; and net rental property loss for that year. If a person is a member of a couple, the person's income for a tax year includes that of his or her partner (point 1069-H3). A person's taxable income for a tax year is his or her assessed taxable income for that year, or if he or she does not have such an assessed taxable income, his or her "accepted estimate of taxable income for that year" (point 1069-H8).
A person's "accepted estimate of an income component for a tax year is that income component according to the most recent notice given by the person under point 1069-H11 and accepted by the Secretary for the purposes of this Module." (point 1069-H10). Pursuant to point 1069-H11, a "… person may give the Secretary a notice setting out the person's estimate of an income component of the person for a tax year." The Secretary "… is to accept a notice referred to in point 1069-H11 for the purposes of this Module only if the Secretary is satisfied that the estimate is reasonable" (points 1069-H12).
Two other provisions, ss. 885 and 886, are relevant in this case. They provide for the recalculation of family payment if, in one instance, taxable income is underestimated by 10% or more or, in the other, a person fails to notify the Department of a notifiable event and the person's taxable income exceeds 110% of his or her taxable income for his or her base tax year and his or her income free area at the time.
Section 885(1) provides:
"If:
(a)in working out the rate of family allowance 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 allowance was based:
the person's rate of family payment is to be recalculated on the basis of that income."
For the purposes of s. 885, a person's income for a particular tax year is the sum of his or her taxable income and certain other specified income (s. 885(2)).
Section 886 provides that:
"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 tax free area at the 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."
Section 891 is relevant in considering the date of effect of a determination made where a person has underestimated his or her income. It provides:
"If:
(a)the Secretary makes a determination of a person's rate of family allowance; and
(b)in making the determination, the Secretary had regard to the person's income for a tax year; and
(c)the income to which regard was had included an amount or amounts estimated by the person; and
(d)the person's income for the tax year is more than 110% of the amount of the income on which the determination referred to in paragraph (a) was based; and
(e)the Secretary makes a determination varying the person's rate of family allowance, or cancelling the person's family allowance, to give effect to the recalculation required by section 885;
the later determination takes effect on the day on which the earlier determination took effect."
Under s. 872(1), the Secretary may require a recipient of family allowance to inform the Department if:
"(a) a specified event or change of circumstances occurs; or
(b)the recipient becomes aware that a specified event or change of circumstances is likely to occur."
An event or change of circumstances is not to be specified in a notice given under s. 872(1) unless the occurrence of the event or the change in circumstances might affect the payment of the family allowance (s. 872(2)). Section 872(3) sets out the formal requirements which must be met by the notice. Those requirements are that, subject to s. 872(3A), the notice:
"(a) must be in writing; and
(b)may be given personally or by post; and
(c)must specify how the recipient is to give the information to the Department; and
(d)must specify the period within which the recipient is to give the information to the Department; and
(e)must specify that the notice is a recipient notification notice given under this Act."
Section 872(3A) provides that a notice is not invalid merely because it fails to comply with ss. 872(3)(c) or (e). In most instances and for the purposes of this case, the period specified under s. 872(3)(d) must end at least 14 days after the day on which the event or change of circumstances occurs or the day on which the recipient becomes aware that the event or the change of circumstances is likely to occur (s. 872(4)).
CONSIDERATION
The submissions
At the heart of this matter lies the interpretation of points 1069H-18 and 1069-H19. Ms Bolton submitted that its effect, and so the effect of a notifiable event, extended only to the end of the calendar year in question. From 1 January until 31 December of each year, the Department was required to determine afresh the base tax year. Point 1069H-18 refers specifically to the "remainder of the family payment period".
Mr Walsh expressed his submission in the alternative. At the heart of his primary submission in relation to the first debt was his submission that point 1069-H18 was not determinative of the matter for the whole of the period. It is determinative of it in relation to the period 10 October, 1996 to 19 December, 1996 but not for the remainder of the period to 19 June, 1997. In relation to the period from January to June, 1997, regard must be had to the notifiable event that occurred in October, 1996. Point 1069-H18 does not have any effect and so regard must then be had to point 1069-H19. The effect of point 1069-H19 is that, if a notifiable event has occurred and if the person's income for the tax year that follows the event tax year is likely to exceed 110% of both the person's income for the base tax year and income free area, the appropriate tax year changes. The appropriate tax year for the part of the family allowance payment period in which the event occurs that comes after the end of the event tax year becomes the year that follows the event tax year. The appropriate tax year for the next family allowance period after that family allowance period is the year that follows the event tax year. In the context of this case, Mr Walsh submitted, that meant that, in January, 1997, the appropriate tax year was the tax year 1997/98. Mrs Dyson's entitlement had to be considered on the basis of her estimate for that year. Contrary to the SSAT's views, it was not a case in which it was relevant to consider whether or not a person has given an estimate and made a request under point 1069H-21. Once it had been determined that Mrs Dyson's actual income for the 1997/98 tax year exceeded 110% of her estimated income for that tax year, s. 885 dictated that her entitlement to family payment was to be recalculated on the basis of her actual income. Mr Walsh observed that her estimated income for the tax year 1997/98 was the best indicator of her income and so of her entitlement to family allowance. It was to be preferred over her income for the tax year 1995/96.
May a person's entitlement be recalculated once a person's actual income is known?
The second approach proposed by Mr Walsh centred upon Module H's being revisited and being reapplied to Mrs Dyson on the basis of her actual income for the appropriate tax year as it varied from time to time. I do not accept that this is the appropriate approach for it ignores the provisions of the legislation. To some extent, the family payment provisions allow for specified uncertainties in assessing a person's entitlement and some of those uncertainties relate to a person's actual taxable income at a particular time. Take for example, the uncertainty that may exist as to a person's taxable income for a particular tax year. Point 1069-H8 recognises that a person may not know his or her assessed taxable income for a particular year. It permits him or her to estimate his or her taxable income for that year. Point 1069-H19 caters for the situation in which a person's income for the tax year following the event tax year "is likely to exceed" (emphasis added) certain pre-determined limits.
The Act also makes provision for the situation in which certain uncertainties have not resolved themselves in the manner predicted. Take, for example, the estimate of taxable income when a person does not know his or her assessed taxable income for a particular year in the past. Clearly, s. 885 permits recalculation on the basis of his or her assessed taxable income once that figure is known. Take also the case of a person who estimates his or her income for the purposes of point 1069-H21 because he or she wishes to have the appropriate tax year changed. Should he or she underestimate that income by 110%, certain consequences follow. The application of that section depends upon a re-assessment using the person's actual income as later assessed. Point 1069-H21 itself prescribes those consequences.
Point 1069-H19, however, is quite a different matter. It is written in terms of what is "likely". I was a member of the Tribunal that looked at various authorities which have considered the meaning of the word "likely" in Re Vulcan Australia Pty Ltd H19 c19
Comptroller-General of Customs (1994) 34 ALD 773. Having regard to those authorities and to the context of the Act, I have concluded that the word "likely" is used in point 1069-H19 in the sense that it was reasonably to be expected, or a real and not remote chance, that the person's income for the tax year that follows the event tax year would exceed 110% of his or her income for the base tax year or of his or her income free area. 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. It follows that matters to which regard would be had would include whether the person and his or her partner were likely to remain in the same employment, whether the hours from that employment were likely to vary and whether they had an expectation of receiving money from another source. The income that the person actually received is simply part of the factual pattern but is not determinative of the issue. If it were otherwise, there would have been no call to use the word "likely". Instead, the provision could simply have referred to those situations in which the person's income for the tax year that follows the event tax year "exceeds" certain limits as it does on point 1069-H18.
It might be said that this approach is contrary to s. 885 which refers to situations in which regard is had to an amount estimated by a person as his or her income and which provides that certain consequences follow if the estimate is incorrect. I do not think that it is contrary to that section. Section 885 refers to situations in which "regard is had to the person's income for a tax year" (s. 885(1)(a)) and the "the income to which regard was had consisted of an amount estimated by the person" (s. 885(1)(b)). As I have already noted, that section is clearly applicable in situations in which a person has not yet received notice of his or her assessed taxable income for the year and gives an accepted estimate of taxable income for that year under points 1069-H10-12. That would apply, for example, in relation to point 1069-H18 in which the appropriate tax year becomes the event tax year if the person's income for the event tax year exceeds prescribed limits set in relation to the base tax year. The point refers to the income for that year. It does not refer to what the income is likely to be or to an estimate of future income. 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. That estimate is given in accordance with points 1069-H11 and 1069-H12. Once the person's assessed taxable income becomes known, s. 885 applies to enable a recalculation to be undertaken.
Were s. 885 intended to apply to any situation in which an estimate were given and, in particular, in any situation which called for an estimate of future income, there would be no need to include point 1069-H21(d). Point 1069-H21 is concerned with estimates of income for a tax year where a person has asked the Secretary to change the appropriate tax year in certain circumstances. The request has the effect of making the tax year in which it is made the appropriate tax year. The person's actual assessed taxable income for that year cannot be known at the time for the tax year will never have been completed at the time that the request is made. Were s. 885 intended to apply to any estimate of income, whether in relation to a past, present or future tax year, there would have been no need to include a provision that the person not only requests that the Secretary make a determination under point 1069-H21 but that he or she agree that his or her rate of family allowance for that period will be recalculated if his or her actual income for that year exceeds 110% of the amount estimated by the person (point 1069-H21(d)).
Point 1069-H19 does not explicitly require that regard be had to a person's income for a tax year but to whether it is likely to exceed the prescribed limits. That necessarily requires an assessment of what the person's future income is likely to be. In view of the specific provision in point 1069-H21 with regard to reassessment once a person's actual taxable income is known, it seems to me that s. 885 cannot be intended to have any application in relation to a provision requiring not the person's actual income or even an estimate of that actual income but an assessment of whether the person's income is "likely to exceed" certain prescribed limits.
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.
Does the effect of a notifiable event extend beyond the end of a calendar year?
The starting point in answering this question is the identification of the appropriate tax year in relation to a person's family payment period. It is the base tax year and point 1069-H14 provides that the base tax year for a family allowance payday (i.e. each alternate Thursday – s. 6(1)) 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. In Mrs Dyson's case, therefore, the appropriate tax year for each family allowance payday during the 1995 calendar year would have been the 1993/94 tax year.
Her appropriate tax year could only change if it was changed by virtue of the operation of the provisions of Module H. In Mrs Dyson's case, it is relevant to look to the effect of a notifiable event under points 1069-H18 and H19. Her spouse's resuming employment was a notifiable event as I find that the Secretary had notified her in various correspondence in accordance with s. 872. That notifiable event did not occur during the calendar year 1995. As no other circumstance occurred to change her appropriate tax year during 1995, it remained the tax year 1993/94 for the whole of the year.
At the beginning of the 1996 calendar year, her appropriate tax year was again her base tax year. In relation to that year, it became the 1994/95 tax year. Again, the Secretary had told her in various correspondence that she would have to notify his Department if her spouse obtained employment. That occurred on 19 September, 1996. The effect of that notifiable event's occurring was that regard had to be had to point 1068-H18. Her assessed taxable income, combined with her spouse's, amounted to $23,946.00 in the 1994/95 tax year. As the notifiable event occurred in the 1996/97 tax year, point 1069-H18 requires that an assessment must be made as to whether her income for the 1996/97 tax year exceeded 110% of her income for her base tax year of 1994/95 and 110% of her income free area. As the 1996/97 tax year had not concluded, Mrs Dyson estimated what their taxable income would be. She estimated that they would receive $23,000.00 and their family payment entitlement was calculated on that basis.
When it transpired that their assessed taxable income was $29,610.00, s. 885 permitted Mrs Dyson's rate of family payment to be recalculated on the basis of her assessed taxable income of $29,610.00. It did so as her actual income exceeded her estimated income by more than 110%. That means that point 1069-H18 must be revisited on the basis of her actual income. When that is done, it is found that Mrs Dyson's income for the 1996/97 tax year exceeded 110% of her estimated amount of income for 1994/95 tax year. Therefore, the appropriate tax year for the remainder of the family allowance period (i.e. of the 1996 calendar year) was the tax year 1996/97. As she had been paid more family payment in that period than that to which she was entitled, the difference was a debt due to the Commonwealth pursuant to s. 1223 and is recoverable. It follows that I agree with the SSAT that she was overpaid an amount of $542.80 for the period 10 October, 1996 to 31 December, 1996.
That brings me to the family allowance period which is the 1997 calendar year. The clear statement in point 1069-H13 is that the appropriate tax year for a family payment payday is the base tax year. That only changes in the circumstances to which I have referred. Having regard to those circumstances, it seems to me that each circumstance only has a "one off" effect, as it were. That is to say, point 1069-H18 has effect when the notifiable event occurs. It has effect in relation to the remainder of the family allowance period. A recalculation is undertaken at that time. A further recalculation may occur at a later time if an estimate of a person's taxable income were used initially.
That is not to say, however, that the notifiable event may be used in the following calendar year to alter what would otherwise be the appropriate tax year. If it is to be used in that way, it means that the same notifiable event requires reference to two different base years. In Mrs Dyson's case, it would require reference to the 1994/95 tax year in 1996 and, in 1997, the 1995/96 tax year. The provision, however, is not expressed in terms of what has happened in the past. Point 1069-H18 specifically refers to the situation in which "a notifiable event occurs" (emphasis added). It does not refer to the situation in which "a notifiable event occurs, or has occurred", as it would have to do if were to enable an assessment to be made by reference to two different base years. Furthermore, it does not purport to make the event tax year the appropriate tax year for the remainder of the family allowance period and the family allowance period following. Instead, it makes the event tax year the appropriate tax year for the remainder of the family allowance period. In Mrs Dyson's case, that was the remainder of 1996.
The clear language of point 1069-H18 is that it has effect only for the remainder of the family allowance period. It seems to me that its clear language should be followed. Where the Parliament intended the current tax year to be retained for consecutive calendar years, it made specific provision for that in point 1069-H15. That provision has no application in this case.
Mr Walsh observed that the SSAT had overlooked point 1069-H19. I do not think that it did so for I do not consider that it has any relevance in this case. Point 1069-H19 only comes into consideration if point 1069-H18 does not alter the appropriate tax year. Its operation is dependent upon point 1069-H18's first being considered and being found to have no effect. It does not stand alone. As point 1069-H18 only has a "one off" effect, so too does point 1069-H19. Once Mrs Dyson's family payment period ended on 31 December, 1996, the notifiable event on 16 September, 1996 ceased to have any effect in altering her appropriate tax year. Even if I were incorrect and point 1069-H19 is not interdependent upon point 1069-H18, the reasons I have given as to the limited effect of point 1069-H18 apply equally to point 1069-H19.
Mr Walsh has submitted that Mrs Dyson's taxable income in 1996/97 was a better guide to what should have been her entitlement. That may be so but what should be cannot alter the scheme and operation of the legislation as passed by Parliament. It follows that Mrs Dyson's appropriate tax year during the whole of the 1997 family payment period was her base tax year of 1995/96. As her taxable income in that year was $12,988.00, she was entitled to family payment at the maximum rate. There was no overpayment to her and so no debt owed by her to the Commonwealth.
On 1 January, 1998, Mrs Dyson's appropriate tax year became the tax year 1996/97. Her taxable income for that period was $29,610.00 and she advised the Department of that on 20 November, 1997. The Department incorrectly calculated her entitlement on the basis of her estimate that it would be $29,000.00. Even though I regard it as a Departmental error to continue to have regard to the estimate, that in itself would not lead to an overpayment that her taxable income. Her actual taxable income was not more than 110% of her estimated taxable income. There is, therefore, no debt in relation to the period 1 January, 1998 to 10 September, 1998.
I have considered whether the debt for the period 10 October, 1996 to 19 December, 1996 should be waived. Two sections of the Act are relevant but I am not satisfied that either enables me to waive the debt. Under the first, section 1237A, I am not satisfied that the debt is attributable solely to an administrative error of the Department or, indeed, to any error at all. It arose by operation of the legislation.
I have also had regard to the power to waive found in s. 1237AAD. That provides:
"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."
The case to which regard is usually had in considering the meaning of the words "special circumstances" is that of Beadle v Director-General of Social Security (1985) 60 ALR 225 (Bowen CJ, Fisher and Lockhart JJ). As Kiefel J said in Groth v Secretary, Department of Social Security (1995) 40 ALD 541:
"The phrase 'special circumstances', it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case (at ALR 229; ALD 674), and for the present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case." (page 545)
There is nothing to take Mrs Dyson's circumstances outside the usual or ordinary case. She is but one of the many people who, having done all that is required of them in relation to notifying the Department of their changes of circumstance, find themselves owing debts to the Commonwealth. The fact that many do, means that Mrs Dyson's circumstances are not of the usual or ordinary case. There are no grounds for finding that there are special circumstances and I am unable to exercise the powers of waive given by s. 1237AAD of the Act.
For the reasons I have given, I:
1.affirm the decision of the Social Security Appeals Tribunal in so far as it determined that:
(a)a debt in the sum of $542.80 exists in relation to the period 10 October, 1996 to 19 December, 1996; and
(b)there is no debt in relation to the period 1 January, 1997 to 31 December, 1997; and
2.decide that the debt in the sum of $542.80 in relation to the period 10 October, 1996 to 10 December, 1996 may not be waived.
3.set aside the decision of the Social Security Appeals Tribunal in so far as it found that there was a debt in relation to the period 1 January, 1998 to 10 September, 1998 and waived that debt and substitute a decision that:
(b)the decision of the respondent made on 21 September, 1998 and affirmed on 28 January, 1999 in so far as it relates to the period 1 January, 1998 to 10 September, 1998 be set aside; and
(b)there is substituted for that decision a decision that there was no debt in relation to the period 1 January, 1998 to 10 September, 1998.
I certify that the sixty four preceding paragraphs are a true copy of the reasons for the decision herein of Miss S A Forgie (Deputy President)
Signed: .........................................
M Martinez AssociateDate of Hearing 28 September, 1999
Date of Decision 20 April, 2000
Advocate for Applicant Mr J Walsh
Solicitor for Respondent Ms G Bolton, Welfare Rights Centre
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