Rees; Secretary, Department of Social Services and (Social services second review)
[2024] AATA 3489
•27 September 2024
Rees; Secretary, Department of Social Services and (Social services second review) [2024] AATA 3489 (27 September 2024)
Division:GENERAL DIVISION
File Number:2024/2997
Re:Secretary, Department of Social Services
APPLICANT
Lisa ReesAnd
RESPONDENT
DECISION
Tribunal:Senior Member D. J. Morris
Date:27 September 2024
Place:Hobart
Pursuant to s 43(1)(c) of the Administrative Appeals Tribunal Act 1975, the Tribunal sets aside the decision of the Social Services and Child Support Division of the Tribunal dated 10 April 2024. In its place, the Tribunal substitutes a decision that the Respondent is not entitled to receive Family Tax Benefit top-up and supplementary payments of $3,451.08 for the 2021-22 financial year.
........................... [signed]........................................
Senior Member D. J. Morris
Catchwords
SOCIAL SECURITY – pensions, benefits and allowances – family tax benefit – where applicant was paid family tax benefit by instalments – where applicant did not lodge tax returns for 2021-22 financial year by the end of the following financial year – where applicant provided information to accountant in good time for returns to be prepared – where accountant did not lodge – where accountant obtained extension of time for lodgement from Australian Taxation Office – whether there were special circumstances – review by authorised review officer – first review by Tribunal – first review found special circumstances applied – Secretary of Department sought second review – consideration of law – consideration of circumstances submitted by respondent to be relevant – whether special circumstances and if so whether those special circumstances taken as a whole prevented lodgement – tribunal satisfied circumstances did not prevent lodgement – decision under review is set aside and new decision substituted
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
A New Tax System (Family Assistance) Act 1999 (Cth)
A New Tax System (Family Assistance)(Administration) Act 1999 (Cth)
Evidence Act 1995 (Cth)Income Tax Assessment Act 1997 (Cth)
Cases
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Groth v Secretary, Department of Social Security (1995) FCA 1708
Secretary, Department of Social Services and Bleeker; Re: [2016] AATA 290
Secretary, Department of Social Services and Cannon; Re: [2015] AATA 1028
Shanhun and Secretary, Department of Social Services; Re: [2016] AATA 675Ward v Commissioner of Taxation [2016] FCAFC 132
REASONS FOR DECISION
Senior Member D. J. Morris
27 September 2024
This is an application for second review of a decision of the Social Services and Child Support Division of the Tribunal (‘first review’) which on 10 April 2024 set aside a decision of Services Australia (‘the Agency’), which is part of the Applicant’s Department, and substituted a decision that the Respondent’s entitlement to family tax benefit (‘FTB’) for the 2021-22 financial year be recalculated on the basis that the Respondent met the FTB reconciliation requirements set out in ss 32C and 32D of the A New Tax System (Family Assistance)(Administration) Act 1999 (‘the Administration Act’) and is entitled to receive any FTB top-up and supplements payable to her.
The Secretary of the Department of Social Services was aggrieved by the first review decision, and sought second review by the General Division of the Tribunal.
For ease of reading, in these reasons the Applicant will be referred to as the Secretary, and the Respondent will be referred to as Ms Rees.
HEARING
A hearing was held by telephone on 29 August 2024 and 6 September 2024, as is permitted by s 33A of the Administrative Appeals Tribunal Act 1975 (‘the AAT Act’). The Secretary was represented by Ms Nadia Markov, a senior lawyer of Services Australia. Ms Rees represented herself. At the end of the hearing, the Tribunal reserved its decision.
The Tribunal admitted the following documents into evidence at the hearing:
(a)Volume of ‘TD’ documents lodged on 30 May 2024 under s 37 of the AAT Act (Exhibit A1);
(b)Application for second review of decision received 13 May 2024 (Exhibit A2);
(c)Letter dated 21 May 2024 (Exhibit R2);
(d)Evidence bundle dated 12 August 2024 (Exhibit R3); and
(e)Residential tenancy agreement (Exhibit R4).
The Tribunal also had regard for: a Statement of Facts, Issues and Contentions dated 8 August 2024 submitted by the Secretary; the Secretary’s Supplementary Submissions, dated 5 September 2024; and the first review decision dated 10 April 2024.
For the reasons that follow, the Tribunal has decided to set aside the first review decision and substitute a decision that Ms Rees is not entitled to receive any FTB top-up or supplements payable to her for the 2021-22 financial year.
A person’s eligibility for FTB payments is determined pursuant to Part 3 of A New TaxSystem (Family Assistance) Act 1999 (‘the Act’) by application of Schedule 1 to that Act. Clauses 3 and 25 of Schedule 1 provide for the inclusion of a Part A supplement in how the rate of FTB Part A is calculated and clause 29 provides for the inclusion of a Part B supplement in the calculation of FTB Part B.
Section 32A of the Administration Act requires that the Secretary of the Department of Social Services disregard the amounts of the FTB supplements when making or varying a determination until the claimant has, in the words of the statute “satisfied the FTB reconciliation conditions” which apply in the relevant period.
Section 32C of the Administration Act provides that an individual must lodge his or her tax returns within the first income year after the relevant income year unless the Secretary is satisfied that there are special circumstances that prevented the individual from lodging the return before the end of that first income year.
In this matter the following was common ground between the Applicant and Respondent:
(1)that Ms Rees was receiving FTB by way of instalments, having provided the Agency with an estimate of her and her partner, Mr Taylor’s, income;
(2)that on 2 August 2023 the Agency undertook a reconciliation of the Respondent’s FTB entitlements for the 2021-22 financial year and decided that, as Ms Rees had failed to confirm her 2021-22 income by 30 June 2023, she would be paid FTB in the amount of $3,564.25 but would not receive top-up or supplementary payments in the amount of $3,451.08 due to the late lodgement of tax returns;
(3)that on 2 October 2023, Ms Rees’s accountant wrote to the Agency to advise that, owing to a COVID-19 pandemic backlog, staff shortages and Australian Taxation Office (‘ATO’) demands, an extension was granted by the ATO for Ms Rees to lodge her tax return (TD, p 20);
(4)that on 10 October 2023, Ms Rees asked for an internal review of the decision not to pay her any FTB top-ups or supplementary payments on the basis that her accountant’s failure to process her and Mr Taylor’s tax returns should be considered as special circumstances (TD, p 87);
(5)that on 6 November 2023, an Authorised Review Officer (‘ARO’), being an officer of the agency not involved in the original decision, affirmed the decision not to pay FTB top-ups or supplementary payments;
(6)that on 22 November 2023, Ms Rees sought review of the ARO’s decision by the Tribunal (first review);
(7)that on 10 April 2024, the Tribunal at first review set aside the ARO’s decision and substituted a decision that Ms Rees met the reconciliation conditions, finding that special circumstances had prevented her and Mr Taylor from lodging their tax returns (TD, p 15); and
(8)that on 13 May 2024, the Secretary sought review of the first review decision by the General Division of the Tribunal at second review.
The question therefore before the Tribunal at second review is whether the provisions in s 32C of the Administration Act apply to Ms Rees. In other words, can she avail herself of the provisions set out in that section to receive the FTB top-up and supplementary payments for the 2021-22 financial year because “special circumstances” are demonstrated?
THE LAW
Section 32C of the Administration Act states:
Relevant reconciliation time – first individual must lodge tax return
(1)This section applies to the first individual for a same-rate benefit period if:
(a)the first individual is or was required to lodge an income tax return for the relevant income year; and(b) clause 38L of Schedule 1 to the Family Assistance Act did not apply to the first individual at any time during the same-rate benefit period.
(2) Disregard paragraph (1)(b) if the first individual was a member of a couple at any time during the same-rate benefit period.
(3) The relevant reconciliation time is the time when an assessment is made under the Income Tax Assessment Act 1936 of the first individual’s taxable income for the relevant income year, so long as the first individual’s income tax return for the relevant income year was lodged before the end of:
(a)the first income year after the relevant income year; or
(b)such further period (if any) that the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the first individual from lodging the return before the end of that first income year.
(4) The further period under paragraph 3(b) must end no later than the end of the second income year after the relevant income year.
ORAL SUBMISSIONS OF MS REES
Ms Rees referred to her written submissions to the Tribunal dated 12 August 2024 (Exhibit R3).
She noted that her accountant obtained an extension of time from the ATO for lodgement of her and her partner’s 2021-22 tax returns until 28 September 2023 and actually submitted the returns on 2 August 2023. She noted that she had submitted her documents to the accountant on 5 April 2023 and had tried to call him and email him many times before he returned her call in late May 2023 and told her that, ‘it was all in hand, he had received an extension from the ATO and there would be no penalty for submitting after 30 June 2023. He was undergoing an extreme shortage of staff at the time due to Covid and other illnesses.’
Ms Rees further submitted that her family had to relocate twice in ten months during the relevant period which was a time consuming and money draining process. She submitted a timeline and copies of two lease agreements.
Ms Rees also submitted that her daughter had been quite unwell for some time, and since 2019 she and Mr Taylor had been seeking help from medical specialists. She submitted that the illness was finally diagnosed as a cyst on her spleen which was removed on 15 December 2023, and that the course of this illness, investigation, and treatment required many blood tests, MRIs and visits to general practitioners and specialist doctors, which was time consuming.
Ms Rees submitted that these three factors: the delay in her accountant submitting the tax returns, forced relocation of her residence twice in 10 months owing to the rental crisis in Western Australia, and her daughter’s long-term illness, with the backdrop of the restrictions imposed by the pandemic, all contributed to why her and Mr Taylor’s tax returns were submitted late, and therefore come within the scope of ‘special circumstances’.
Ms Rees said she had never submitted her tax returns late before and has now changed her accountant, even though she had been a long-term client of her previous accountant.
In her oral submissions, Ms Rees added to the factors that support her written contentions. She said she had a minor car accident during the period, and also broke her toe during one of her house moves. She said the specialist her daughter was seeing retired, which required additional steps to engage a new doctor. Ms Rees said that the house moves were in March 2022 and December 2023.
In response to a direct question from the Tribunal, Ms Rees said that she and Mr Taylor did their tax returns together, and always had. She said that when she had been advised by her accountant that the ATO had granted an extension of time to lodge the returns, she assumed the ATO would be linked to the Agency, in terms of FTB, and that her accountant assumed that, as well.
ORAL SUBMISSIONS OF THE SECRETARY
Ms Markov acknowledged that Ms Rees and Mr Taylor faced a busy period in their lives in the lead up to the lodgement deadline. She said that the relevant question is whether the combination of factors prevented Ms Rees and her partner from lodging their tax returns on time, and the Secretary submitted they did not.
Ms Markov noted that Ms Rees provided all the paperwork for her and Mr Taylor’s tax returns to their accountant in April 2023, well before the 30 June 2023 deadline.
ORAL EVIDENCE
Ms Rees was asked whether she remembered receiving a letter from the Agency dated 23 March 2023 reminding her that she must confirm her income by 30 June 2023. She responded that she could not say whether she received it, she did not recall it, but did recall receiving a letter asking her to confirm her and Mr Taylor’s income, which she did.
Ms Markov asked Ms Rees whether she was aware of the deadline. Ms Rees responded: “I was aware of the deadline. I have always known that. I understood from my accountant that he had received an extension from the ATO until the end of September and he submitted the returns in August.”
Ms Rees confirmed that the family had completed their house move by February 2023 and that she submitted documents required to complete the tax returns to her accountant on 5 April 2023.
Ms Markov asked Ms Rees whether she agreed that there was nothing preventing her from submitting the returns to the accountant on the date she submitted them, 5 April 2023. Ms Rees responded, “There was nothing preventing me. What was preventing me was the accountant’s inability to put it in. I was able to, but my accountant was not.”
Ms Markov asked Ms Rees whether she sought any remedy from the accountant for the late lodgement. She responded that she emailed him, but was reassured because he told her he had an extension of time. Ms Markov asked whether Ms Rees understood that the FTB payments come from Centrelink. Ms Rees responded that she thought ‘they were combined’.
CONSIDERATION
Were there special circumstances that prevented lodgement?
In order to decide whether the decision under review was correct, the Tribunal must look at the wording of s 32C and in particular whether special circumstances prevented the Respondent lodging her tax return.
The term ‘special circumstances; is not defined in the Act or in the Administration Act. In Groth v Secretary, Department of Social Security (1995) FCA 1708, Kiefel J (as Her Honour then was, of the Federal Court) considered the meaning of the expression “special circumstances”. Her Honour said:
The phrase ‘special circumstances’, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle’s case [Beadle v Director-General of Social Security] at ALR 229 ALD 674, and for 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. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.
In order to decide whether the decision under review was correct, the Tribunal must look at the wording of s 32C and in particular whether special circumstances prevented the Respondent lodging her tax return.
In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, Besanko J warned against requiring there to be exceptional circumstances before there may be said to be special circumstances. His Honour said:
... I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.
Importantly, in Ward v Commissioner of Taxation [2016] FCAFC 132, the Full Court (Robertson, Davies and Wigney JJ) held, at [43]:
In our view, the Tribunal erred in law by taking too narrow a view of what may constitute “special circumstances” within the meaning of the statute. This may have been caused by unnecessarily considering factors in isolation before focusing on the entirety of the circumstances said by the applicant to be special.
As I said in Re: Shanhun and Secretary, Department of Social Services [2016] AATA 675 (‘Shanhun’), s 32C of the Administration Act requires two essential ingredients to be satisfied: first that special circumstances exist, and, second, that these special circumstances acted to prevent the individual – the taxpayer claiming the benefit – from lodging his or her tax return on time.
In looking at the meaning of the complete clause of s 32C(3)(b) in the Administration Act, the Tribunal must look at the ordinary, everyday meaning of the word ‘prevent’. The Oxford English Dictionary definition of ‘prevent’ is to ‘stop [someone] from doing something’. The Macquarie Dictionary defines ‘prevent’ as ‘to keep from occurring; to hinder (a person, etc.) from doing something’.
Delay by accountant
There have been a number of cases before the Tribunal where an accountant has failed to lodge a taxpayer’s return (e.g. Secretary, Department of Social Services and Bleeker [2016] AATA 290 (‘Bleeker’); Cannon and Secretary, Department of Social Services [2015] AATA 1028 (‘Cannon’); and Secretary, Department of Social Services and Johnson [2016] AATA 304) (‘Johnson’). These are useful to be aware of, but they have no precedential value: each application must be considered afresh in an individual case because there is no doctrine of stare decisis in the Tribunal as a reviewer of the merits of an administrative decision. The Tribunal is exercising an administrative power not a judicial one.
Having said that, the Tribunal is also informed by previous Tribunal decisions where the material facts of a particular situation may be very similar. In Bleeker, the accountancy firm which had carriage of the applicant’s tax returns had problems with software systems which were not known to the applicant. In Johnson, the accountant entrusted with preparing Mr Johnson’s tax returns closed his office and disappeared. In Cannon, the accounting firm employed a temporary secretary who stored the Applicant’s partner’s tax return in a storeroom rather than lodging it, and the firm took full responsibility for the failure to lodge on time.
In Shanhun, an applicant had been let down by her accountant who had not lodged her tax return on time, even though she had given him the paperwork well in time, and had physically visited his practice to sign the return for lodgement. In that matter, I noted that Ms Shanhun had received advice from the Department reminding her of the requirement to lodge the return and the consequences in regard to FTB supplements if a tax return is not lodged. As is the case in relation to Ms Rees, I must look at the whole of this particular limb of section 32C(3)(b) of the Administration Act together in its statutory context.
In Angelakos, the Court said that the Parliament has enacted this section to allow discretion in a limited field with the phrase that there are “…special circumstances that prevented...” the taxpayer from lodging his or her return before the end of the relevant financial year. (Emphasis added.)
Ms Rees’s accountant sent a letter to the Agency dated 2 October 2023 (TD, p 20) which relevantly states:
We are accountants for the above-named client [Ms Rees] and wish to advice [sic] that the client presented to our office, on the 4th April 2023, all books, records, documents and information required to prepare her year ended 30th June 2022 tax return.
Due to a number of factors, including staff shortages and illnesses, still catching up on work from COVID period, ATO demands – including reviews and audits that need to be attended to when ATO say [sic], we had anticipated that we would not have our clients’ return prepared and lodged by her due date so lodged a request for extension to lodge to the 28th September 2023.
We finalised our clients’ return[s] and lodged on 2.8. 2023.
It would seem from this letter that the accounting firm itself sought the extension of its own volition because it knew it was overwhelmed and would not lodge Ms Rees and Mr Taylor’s tax returns before 30 June 2023. From the timeline she provided, Ms Rees states that she spoke to her then accountant on 19 May 2023 and he assured her that he had received an extension from the ATO. She erroneously assumed that this would encompass an extension in regard to entitlement for FTB, but there is no such provision in the Act or Administration Act. It would seem that Ms Rees may have recourse through her former accountant’s professional indemnity insurance because of their failure to act, especially if she is right in her submission that her accountant said the ATO extension was somehow linked to Centrelink’s system.
But, in terms of these delays advanced to Ms Rees by her accountant, these do not amount in the Tribunal’s view to circumstances which ‘prevented’ her from lodging her and Mr Taylor’s tax returns before 30 June 2023. She had lodged her own paperwork with her accountant in early April 2023, well after the end of the 2021-22 financial year but in ample time for lodgement. The Tribunal understands the submission of Ms Rees that she thought that obtaining an ATO extension in terms of lodgement of her and Mr Taylor’s tax return would somehow be linked to the reconciliation requirements under the Administration Act, but that is not the case, and the Tribunal is surprised at her submission that her former accountant also thought that was the case. The obligation of a person receiving FTB under the Act and the Administration Act relates to the receipt of a benefit or entitlement, and does not relate to general compliance with the lodgement provisions in the Income Tax Assessment Act 1987 on all taxpayers to lodge annual returns if they have earnt taxable income.
Other factors
Ms Rees submitted other factors that were affecting her daily circumstances in the relevant period. She submitted copies of lease agreements, and the Tribunal accepts that she and Mr Taylor and the family were forced to move twice, in April 2022 from their house at Parkville, and in January-February 2023 from their house in Mundaring, on both occasions because of the decisions of landlords, and not through any actions of their own. The Tribunal accepts that this came at both an inconvenience and a cost to the household. However the moves were many months before the end of the 2022-23 financial year.
The Tribunal also notes that, during the second move, Ms Rees fractured her toe in February 2023 and had a minor car accident, which she dated as on 15 May 2023, which required her car to be off the road for repairs for five days. In the case of the foot injury, this occurred two months before she lodged her income paperwork with the accountant, and in the case of the car accident, this occurred whilst he was preparing the returns. Neither of these events of themselves affected Ms Rees’s ability to lodge her return.
The Tribunal also accepts the veracity of the evidence about the illness of Ms Rees’s daughter, medical proof of which was furnished to the Tribunal. Ms Rees has provided a large amount of medical documentation going back to 2019 about explorations of her daughter’s symptoms and how long it took for there to be a diagnosis of a splenetic cyst. She has provided details of out-of-pocket costs and many appointments for blood tests, specialist visits and MRIs, leading up to surgery in mid-December 2023.
In respect of the element in the accountant’s letter about the impact of COVID-19, the Tribunal accepts the pandemic, especially the state government lockdowns, was a general factor affecting many people, whether or not they were in receipt of social security benefits or entitlements, but there were no specific submissions that this was ‘out of the ordinary’, which might place Ms Rees in a special circumstance and enliven the discretionary provision in s 32C. If the accounting firm was so overwhelmed because of staff illness, it should have informed its clients, including Ms Rees, that it was unable to lodge their returns as it had been engaged to do. She could then have made other arrangements.
SUMMATION
The Tribunal accepts the truth of the evidence submitted by Ms Rees about a combination of events that she faced in the 18 months or so before 30 June 2023 and, in the case of her daughter’s illness, for another six months thereafter. Mindful of the conclusions of the Full Federal Court in Ward, the Tribunal must consider the entirety of the circumstances said to be ‘special’. But, because of the particular way s 32C(3) is written, those special circumstances must have acted to prevent the lodgement of the tax returns before 30 June 2023. I accept there was a lot going on in Ms Rees’ and Mr Taylor’s lives, with unwanted house moves, a concerning quest for diagnosis of their daughter’s illness, and other events, including a car accident and the impacts of the pandemic. Added to this was the tardiness of the accountant. But considering the totality of the circumstances cited by Ms Rees, the Tribunal finds that, all together, they do not amount to special circumstances which prevented her from lodging the tax returns on time.
They are unfortunately the normal vicissitudes of life and are not ‘special’ in the sense of being unusual, uncommon or sufficiently out of the ordinary to constitute special circumstances. If there was evidence before the Tribunal of some particular instance which was beyond Ms Rees’s control which prevented lodgement, that might trigger the discretion provided for in this part of the legislation, but the Tribunal does not have evidence to support that.
For completeness, in terms of a reminder notification of the requirement to lodge before 30 June 2023 or else FTB top ups and supplementary payments would not be paid, the Tribunal finds that the letter sent by the Agency to Ms Rees at her residence on 22 March 2023 (which she confirmed in evidence was her correct postal address at the time) is presumed to have been posted by the Agency five business days after the date on the letter (s 163 of the Evidence Act 1995) – 29 March 2023 – and to have been received at her Jane Brook address seven working days after having been posted (s 160 of that same Act), which is 7 April 2023. I note that this was after Ms Rees had submitted her paperwork to her then accountant.
The Tribunal finds that the discretion provided in s 32C(3)(b) of the Administration Act is not enlivened in this case.
The result of the Tribunal’s consideration is that the first review decision will be set aside, and its decision will be substituted with a decision that Ms Rees was not eligible for FTB top-ups or supplementary payments for the 2021-22 financial year because of the late lodgement of her and Mr Taylor’s tax returns.
DECISION
Pursuant to s 43(1)(c) of the AAT Act, the Tribunal sets aside the decision of the Social Services and Child Support Division of the Tribunal dated 10 April 2024. In its place, the Tribunal substitutes the decision that the FTB top-up and supplementary payments of $3,451.08 are not payable to the Respondent for the 2021-22 financial year.
I certify that the preceding 52 (fifty -two) paragraphs are a true copy of the reasons for the decision herein of Senior Member D. J. Morris
...................................................................
Associate
Dated: 27 September 2024
Date(s) of hearing:
29 August, 6 September 2024
Advocate for the Applicant:
Ms Nadia Markov
Solicitors for the Applicant:
Services Australia
Respondent: Self-represented
0