Reid and Secretary, Department of Education, Science and Training
[2006] AATA 1051
•6 December 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 1051
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/202
GENERAL ADMINISTRATIVE DIVISION )
Re RACHEL REID Applicant
And
SECRETARY, DEPARTMENT
OF EDUCATION, SCIENCE AND TRAININGRespondent
DECISION
Tribunal Dr KS Levy, Senior Member Date6 December 2006
PlaceBrisbane
Decision The Tribunal determines that -
1. The decision under review is set aside.
2. The Respondent is ordered to refund any amount of the Youth allowance debt already repaid by the applicant or the applicant’s father.
.....................[Sgd].........................
KS Levy
CATCHWORDS
SOCIAL SECURITY – Youth allowance – parental income assessment – interest in trust – eligibility thought to be based on parents’ income and not means - waiver of debt – administrative error – can debt be written off – waiver of debt in special circumstances – decision set aside
Social Security Act 1991 ss 10B, 1067G, 1223, 1236, 1237A, 1237AAD
Schulze and Secretary, Department of family and Community Services (2004) 81 ALD 636; (2004) 6(4) SSR 37; [2004] AATA 705
Oughtred v Inland Revenue Commissioners [1960] AC 206; [1958] Ch 283; [1959] 3 All ER 623; [1959] 3 WLR 898
Air Link Pty Limited v Paterson [2005] HCA 39; (2005) 218 ALR 700; (2005) 79 ALJR 1407; (2005) Aust Torts Reports 81-797
Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194; (2005) 214 ALR 24; (2005) 79 ALJR 679; (2005) 138 IR 252.Palgo Holdings Pty Ltd v Gowans [2005] HCA 28; (2005) 221 CLR 249; (2005) 215 ALR 253; (2005) 79 ALJR 1121
Leah v Secretary, Department of Employment, Education, Training and Youth Affairs (1998) 86 FCR 230; (1998) 52 ALD 274; (1998) 28 AAR 45
Secretary, Department of Family and Community Services v Butt (2000) 31 AAR 399; [2000] AATA 623Re Chen and Secretary, Department of Family and Community Services (1999) AATA 151
Beadle v Director-General of Social Security (1985) 60 ALR 225; (1985) 7 ALD 670
Dranichnikov v Centrelink [2003] FCAFC 133; (2003) 75 ALD 134; (2003) 53 ATR 270; (2003) 5(10) SSR 138
Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61
Social Services, Director-General of v Hales(1983) 47 ALR 281; (1983) 78 FLR 373; (1983) 5 ALN No 116
Social Security, Department of v Hales (1998) 82 FCR 154; (1998) 153 ALR 259; (1998) 51 ALD 695; (1998) 26 AAR 511; (1998) 3 SSRREASONS FOR DECISION
6 December 2006 Dr KS Levy, Senior Member 1.The applicant, Rachel Reid, lodged an application for youth allowance on 28 May 2001. She included her parents’ income and declared that they had an interest in a trust, a private company and an unlisted public company. A trust tax return for the year 2000 was also provided with the application. That claim was rejected because of her parents’ income.
2.On 28 November 2003, she again enquired about youth allowance. She formally lodged an application on 5 January 2004. In response to a question to be completed by her father about whether he was claiming a pension, he answered “yes”, but qualified it with the comment, “claim for aged pension not finalised”. In relation to a question about his taxable income for the base tax year, the question was unanswered but a notation was made indicating the Tax Notice of Assessment for the 2002/03 financial year was attached. In relation to whether Mr or Mrs Reid had an interest in a trust, they answered “No”. A Parental income assessment for 2002/03 was provided to Centrelink on 6 January 2004. The application was rejected on 23 January 2004.
3.However, on 2 February 2004, Ms Reid was notified that she was exempted from the parental income test and therefore, she was granted youth allowance. At the end of that year, a data matching exercise undertaken by the Australian Taxation Office, revealed Mr Reid had a partnership income of $17923 (T25, folio 181-184). On 2 December 2004, a letter requesting further information and particulars was sent to the applicant and her parents. On 2 December, Mr and Mrs Reid responded with copies of their individual tax returns and with the supplementary returns showing partnership income.
4.Ms Reid was granted a jobseeker allowance as from 13 January 2005. A Family Actual Means Test Form was lodged on 25 January detailing spending, savings and deductions for the 2002/2003 tax year. As a result, Centrelink raised a youth allowance debt of $5028.87 for the period 22 December 2003 to 21 November 2004. The original decision was affirmed by the Original Decision Maker on 2 September 2005. Following a Freedom of Information Request, a review was requested by an Authorised Review Officer. That review affirmed the original decision on 7 December 2005. On review to the Social Security Appeals Tribunal, the original decision was affirmed on 28 February 2006. That decision is now the subject of the present application to the Administrative Appeals Tribunal (“the Tribunal”) under section 29(1) of the Administrative Appeals Tribunal Act 1975.
5.Ms Reid had completed a Bachelor of Applied Science degree from University of Queensland at Gatton at the end of 2003. After completing that course and applying for jobseeker allowance, and prior to receiving a formal response to that application, the applicant was offered, and accepted the offer, to undertake a further year of study in the Honours program at Gatton Campus. She claims that she understood that her eligibility for youth allowance was determined on her parents “income” and not their “means”. Her father had a similar understanding.
6.The applicant did not appear at the hearing. Her father, Mr Stephen Anthony Reid appeared for his daughter. The respondent was represented by its Advocate, Ms Jasmine Forsythe.
ISSUES
7.The issues for the Tribunal’s determination are:
(i)Whether Ms Rachel Reid received youth allowance in excess of her correct entitlement;
(ii)If the answer to (i) is yes, is the overpayment a debt due to the Commonwealth?; and
(iii)If the answer to (ii) is yes, can the whole or part of the debt due to the Commonwealth be written off or waived?
Legislation
8.The following are the relevant legislative provisions in determining this matter:
§ Social Security Act 1991
10B Family actual means test definitions
10B(3) A parent of a person (the person concerned) is a designated parent for a youth allowance payment period if:
(c) in the base tax year, the parent had an interest in:
(i) a proprietary company; or
(ii) an unlisted public company; or
(iii) a trust; or
1067A When a person is regarded as independent
Application
1067A(1) This section applies to determine whether a person is to be regarded as independent for the purposes of this Part and Parts 2.11, 3.4A, 3.4B and 3.7. A person is not to be regarded as independent except as provided by this section.
Module G—Assets test
Submodule 2—Persons to whom family actual means test applies
General provision
1067G‑G2 Subject to point 1067G‑G3, the family actual means test applies to a person who:
(a) claims or receives youth allowance; and
(b) is not independent; and
(c) has a parent who is a designated parent.
Exceptions
1067G‑G3(1) The family actual means test does not apply to a person:
(a) while a family member of the person is receiving exceptional circumstances relief payment; or
(b) for so much of the calendar year in which the relief payment is received as follows the cessation of the relief payment.
1067G‑G3(2) In subpoint (1):
exceptional circumstances relief payment means:
(a) exceptional circumstances relief payment under the Farm Household Support Act 1992; or
(b) drought relief payment under that Act as in force immediately before the commencement of the Farm Household Support Amendment (Restart and Exceptional Circumstances) Act 1997.
Person who may request Secretary to determine appropriate tax year
1067G‑G5(1) This point applies to a person who claims or receives youth allowance if the following conditions are satisfied.
1067G‑G5(2) The first condition is that, except for this point, youth allowance:
(a) would not be payable to the person because the rate of youth allowance is calculated to be nil; or
(b) would be calculated to be payable at a reduced rate.
1067G‑G5(3) The second condition is that the person gives to the Secretary, in writing:
(a) evidence, or an estimate, that the amount of the actual means of the person’s family for the tax year (the following tax year) immediately after the base tax year is substantially less than it was in the base tax year:
(i) because of a circumstance or event that is beyond the control of the person and the person’s family members; or
(ii) because the person or a family member of the person is undertaking full‑time study in the following tax year; or
(iii) because a designated parent of the person has ceased to be a parent of the kind referred to in paragraph 10B(3)(c), (d), (e), (f) or (g); and
(b) if subparagraph (a)(i) applies—evidence of the circumstance or event concerned;
and, if the person gives an estimate as referred to in paragraph (a), the person agrees, in writing, to the person’s rate of youth allowance being recalculated if the actual means of the person’s family for the following tax year exceed the amount of the estimate.
Making of request
1067G‑G6(1) A person to whom point 1067G‑G5 applies may request the Secretary, in accordance with a form approved by the Secretary, to make a determination under this point in relation to a youth allowance payment period.
1067G‑G6(2) If:
(a) the person makes such a request; and
(b) the youth allowance payment period to which the request relates ends on or after the later of:
(i) the day on which the request is made; or
(ii) 1 January in a year;
the Secretary must determine, subject to subpoint (3), that the appropriate tax year for the person in relation to the youth allowance payment period is the tax year immediately after the base tax year.
….
1223 Debts arising from lack of qualification, overpayment etc.
1223(1)Subject to this section, if:
(a)a social security payment is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
….
1223(1AB) Without limiting by implication the circumstances to which paragraph (1)(b) applies apart from this subsection, a person who obtained the benefit of a social security payment is taken not to have been entitled to obtain the benefit if the payment should not have been made for any one or more of the following reasons:
(a)the payment was made to the person by mistake as a result of a computer error or an administrative error;
(b)the person for whose benefit the payment was intended to be made was not qualified to receive the payment;
(c)the payment was not payable;
(d)the payment was made as a result of a contravention of the social security law, a false statement or a misrepresentation;
(e)the payment was made in purported compliance with a direction or authority given by the person who was entitled to obtain the benefit of the payment but the direction or authority had been revoked or withdrawn before the payment was made;
(f)the payment was intended to be made for the benefit of someone else who died before the payment was made.
1236 Secretary may write off debt
1236(1) Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
1236(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a)the debt is irrecoverable at law; or
(b)the debtor has no capacity to repay the debt; or
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
1236(1B) For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(a)the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in section 1231, 1232 or 1233 has elapsed; or
(aa)the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance) (Administration) Act 1999 has elapsed; or
(b)there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c)the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d)the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.
1236(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a)deductions from the debtor’s social security payment; or
(b)deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or
(c)setting off under section 84A of that Act;
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
….
1237A Waiver of debt arising from error
Administrative error
1237A(1) Subject to subsection (1A), 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).
1237A(1A) Subsection (1) only applies if:
(a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or
(b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;
whichever is the later.
1237AAD Waiver in special circumstances
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 1: Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth.
Note 2: This section has effect subject to section 1237AAE in relation to an assurance of support debt.”
EVIDENCE
9.At the hearing the Tribunal admitted the following documentary exhibits:
Exhibit 1Submissions by Ms Rachel Reid and Mr S.A. Reid, dated 25 August 2006
Exhibit 2“T” Documents under section 37 of the Administrative Appeals Tribunal Act 1975
Exhibit 3Respondent’s Statement of Facts and Contentions
Exhibit 4Submission of Ms Rachel Reid and Mr S.A. Reid dated 22 March 2006.
§ Mr Tony Reid
10.Mr Reid explained that the applicant, who is his daughter, could not be in attendance at the hearing. He stated that the original decision was based on a financial assessment using the 2002/03 financial year as the base year for the assessment of her youth allowance. Mr Reid stated that his daughter claims the only period the decision should be based on is the current year assessment, that is, the period from his retirement (December 2003) to the date of payments (February to November 2004).
11.The witness stated that his application for pension and his daughter's application for youth allowance occurred on the same day. They were concerned about his "income" rather than his "means". He stated that there was no income from the trust after the 30 June 2003 and the only proceeds were the capital from the sale of trust in July 2003. He emphasised that this was all before his daughter's application for youth allowance.
12.Mr Reid retired in December 2003. His daughter's application at that time could not be processed by Centrelink until the enquiry about his income had been resolved. He submitted that there was undoubtedly a technical mistake, but it was his mistake and had occurred without his daughter's knowledge.
13.Under cross-examination, Mr Reid was referred to the Folio 156 of Exhibit 2. That is the application by his daughter for youth allowance. It showed that she completed a Bachelor of Applied Science from the University of Queensland on 12 December 2003 (Folio 159). It also showed that the applicant intended undertaking an Honours year at the Gatton campus from 1 March 2004 to 21 November 2004 (Folio 160). The witness was also referred to Folio 166 where, at question 12, in response to the question, "did you have an interest in a trust, a private company or a listed public company?" Mr Reid answered "no". He agreed that the answer was incorrect, but said this was not hindsight - he did not know it was correct at the time.
14.Mr Reid also understood at the time that the assessment was being undertaken on "income" and that the income he showed in his application was correct, that is, $35,000 income from the unit trust. He reiterated that the income at the time was the only consideration as far as he was aware. He understood that this was required to compare the downturn in time from the previous year, because he had no income from the trust in that financial year.
15.Mr Reid stated that his daughter's previous application for youth allowance had been declined because of parental income. That was the information conveyed formally by Centrelink and he did not understand that there was a consideration of "income" and another consideration of "means". He mentioned that his daughter had had communication with Centrelink from 2001 and that there had never been any mention of "means".
16.Mr Reid indicated that there was no income from the trust in the financial year in which his daughter received youth allowance because the trust was sold in July 2003. Indeed, the settlement date in the contract was to be 1 July 2003, although, it was ultimately settled on 11 July 2003 because the purchasers could not settle until that date. When asked whether he had an interest in the trust in the 2002/03 year, the witness answered, "yes". When asked whether he had an interest in the trust in 2003/04, he answered "no". Ms Forsyth pointed out that the agreement was dated to be settled on 1 July 2003 and in fact formally settled on 11 July 2003. But again when asked whether he had an interest in the trust in 2003/04, Mr Reid again answered, "no". He emphasised that he answered "no" because he had no income earning capacity from 1 July 2003. He mentioned that he had forgotten that the settlement occurred on 11 July 2003 but, that was an issue that Aura investments had and could not settle until that date.
17.Mr Reid told the Tribunal that he retired on 18 or 19 December 2003, but he had worked up until that time. His annual income was $79,000 (approximately). When asked how much income he earned in the period July to December 2003, he answered about half of $79,000, less $35,000 earned from the trust (i.e.$ 40,000 – $35,000 = $50,00 approximately). He also received long service leave payment (about $13,000). Therefore, he earned approximately $18,000 for that period. He was referred then to Folio 7 of the T documents which showed the SSAT based its decision on his income being $40-$50,000 for that year. He did not agree that he had provided that information to the SSAT and therefore, their assessment based on that level income was wrong.
18.Mr Reid was asked about his expenditure for the 2003/04 year and in particular, whether it was higher or lower than the 2002/03 year. He stated that there was probably higher expenditure on the 2003/04 year as he had to upgrade an old vehicle which cost about $35,000, as well as having to undertake some repairs to his house.
19.Mr Reid was also asked about his daughter's current financial circumstances. He stated that she was no longer a student and she had provided a statement of assets and liabilities after the debt was raised and after the SSAT hearing in 2005. Their financial circumstances were the same now as previously. He also mentioned that a large part of the debt is a higher education contribution scheme debt. He was also asked if his daughter was in good health. He answered "yes" and at that point, Mr Reid broke down emotionally. He continued told Tribunal that his daughter had had an operation to remove a cancerous lesion of some type and that she is in good health now. Mr Reid stated that he had only found out about the disinformation in the previous four months as his daughter had not told him as she did not want to worry him.
20.Mr Reid mentioned the debt has been fully repaid as contained in his submissions.
FINAL SUBMISSIONS
21.The respondent submitted that if the applicant was not independent, then she was not entitled to youth allowance. The secretary also argued that in relation to section 1067A(1), the error occurred, at least in part, because Mr Reid had provided incorrect information and therefore, it was not solely an error of Centrelink.
22.In relation to "special circumstances", the responded emphasised that as a matter of fact, the applicant had an interest in a trust on 1 July 2003. The respondent also mentioned that as the expenditure in 2003/04 was similar to the previous year, the Department's position would have been similar in the current year as opposed to the base tax year. It was mentioned that Miss Reid may have been entitled to youth allowance in that year, however, this could not be confirmed. She mentioned that it was unlikely that she might have been entitled to the allowance from 1 July 2003 to December 2004 based on the income expenditure of Mr Reid. The Tribunal was referred also to Schulze and Secretary, Department of family and Community Services [2004] 81 ALD 636, where a similar circumstance was found not to be "special circumstances".
23.Mr Reid asked the Tribunal to take particular note of Exhibit 1 and specifically, pages 1 to 4 of that submission. That submission prepared by the applicant and Mr Reid and dated 25 August 2006, emphasises two separate, but related events, both of which occurred on 28 November 2003:
(i)At the office interview on 28 November 2003, Rachel Reid was advised that she was not eligible for youth allowance due to parental income;
(ii)In a follow-up phone call, the applicant asked for a review of the previous decision not to allow youth allowance as her father was retiring and would be applying for a pension.
24.Mr Reid also submitted that the rejection of youth allowance was based on parental income and he was never alerted to the assessment based on "means". It was also submitted that Ms Reid had never been informed by Centrelink of the existence of the Family Actual Means Test, or that it was significant in the current assessment.
25.Mr Reid also submitted that the Tribunal should take note of the earlier submission prepared by Ms Reid and himself, which is dated to 22 March 2006 (Exhibit 4). That statement submits that there are a number of errors by the Commonwealth including:
(i)The original application dated 5 January 2004 discloses the full taxable income of the applicant's parents, but the allowance was approved in light of the information provided;
(ii)The ANZ schedule of Mr and Mrs Reid's investments were enclosed with the application of 5 January 2004. This was apparently also not picked up by the Adelaide R O;
(iii)There is nothing in section 1067 G-G7 which limits the time frame within which the request for seeking an alternative base year could be made.
26.Mr Reid also submitted that Centrelink had factual data of the family income at the time of the assessment. He also pointed out that all family assets were locked into superannuation funds at 5 January 2004.
Consideration and Findings
27.I have carefully considered all of the relevant evidence, both oral and documentary, in arriving at the decision in this matter.
§ Findings of Fact
28.The following findings of fact are made:
(a)Rachel Reid completed a Bachelor of Applied Science from University of Queensland in 2003 and commenced Honours in 2004.
(b)She was granted youth allowance for the period 2 February 2004 to 21 November 2004.
(c)The department had a record of the applicant’s father’s interest in a trust since her original application to Centrelink in 2001.
(d)The application of 5 January 2004 enclosed tax returns and other relevant financial information of the applicant's parents assets liabilities and income
(e)The applicant's father entered into a contract to sell the units owned by him in a unit trust prior to 30 June 2003 and with anticipated settlement date of 1 July 2003. Settlement occurred on 11 July 2003.
(f)Mr and Mrs Reid turned no income from the trust on 1 July 2003 or on any subsequent date. They obtained a return of capital on sale of the issues on 11 July 2003.
(g)Mr Reid was a witness of truth and regarded the only consideration to his daughter's application was his income and not his family "means". This fact is also vicariously attributed to the applicant, Rachel Reid.
§ Findings in relation to the Issues
§ Issue (i) - has ms reid received youth allowance in excess of her correct entitlement?
29.From the facts of this case, implicit in answering this question is the fundamental issue of whether Ms Reid was entitled to youth allowance at all. This turns on whether the Family Actual Means Test applied in her case. This is set out in section 1067 G.-G2 and provides that the Family Actual Means Test applies subject to section 1067 G.-G3 if a person-
a. claims or receives youth allowance; and
b. is not independent; and
c. has a parent who is a designated parent.
30.All three of these preconditions must be satisfied. Condition a. in paragraph 29 above is not in dispute and the Tribunal accepts that this condition is satisfied.
31.Condition b. is provided for in section 1067A(1), which lists a number of exemptions. There is no evidence that any of those exemptions apply. Therefore, this second condition is also satisfied.
32.Condition c. of paragraph 29 is determined by reference to the definition of "designated parent" in section 10B(3)(c)(ii) and depends on whether the applicant's parents had an interest in a trust in the base tax year. The fact that Mr Reid had sold the shares in the unit trust by contract prior to 30 June 2003 and which was to be settled on 1 July 2003, could be interpreted that for all practical purposes, his interest ceased on 30 June 2003. Even though settlement did not occur till 11 July 2003, this was not at the initiative of Mr Reid, but of the purchasers. However, in Schedule 1 under the agreement, it specifies the contract was to be settled at 10 a.m. on 1 July 2003. Therefore Mr Reid could be regarded as having an interest in the trust in the 2003/04 financial year.
33.The question has been raised by the applicant and her father whether an alternative base tax year could have been determined. If so, whether she had a “designated parent” and therefore, could justify a base tax year of 2003/04 rather than 2002/03, needs to be considered. This is provided for in sections 1067G-G5 and 1067G-G6. It is a matter of statutory interpretation about whether Mr Reid's interest had been devolved by 1 July 2003. There is authority for the view that where a specifically enforceable agreement assigns an interest in property, then an equitable interest is created by the vendor and the purchaser attains an equitable interest in the property so that the vendors hold the property to be sold as an implied or constructive trustee for the purchaser (Oughtred v Inland Revenue Commissioners [1960] AC 206 per Lord Radcliffe).
34.Therefore, it could be implied that Mr Reid held the shares under contract of sale as an implied or constructive trustee. In other words, he could reasonably be regarded as holding the legal and beneficial ownership of those shares but that he had created a new equitable interest, out of and separate from his own legal title in those shares. Despite the contract of sale being specific about the time of settlement (which was ultimately delayed a further 10 days), it is apparent that Mr Reid intended to sell the shares, so that he had no income from the trust and no involvement with the business aspects of it in the 2003/04 financial year. Indeed, he had no involvement with it and no income from the Trust for over six months at the time of his daughter’s application for youth allowance.
35.Does this lead to a proper interpretation that he might be regarded as having effectively sold his interest in the trust by 1 July 2003? The Tribunal thinks it does. It is clear that the High Court has determined that the current approach to statutory interpretation must be a purposive approach and not a literal approach (see Air Link Pty Limited v Paterson [2005] HCA 39; Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9. Also, Kirby J in Palgo Holdings Pty Ltd v Gowans [2005] HCA 28 said that the High Court "…should be on guard against any temptation to return to the dark days of literalism". He also said, at paragraphs 35-40:
i.A purposive interpretation and not a literal approach is the method of statutory interpretation to be followed.
ii.The meaning of words is to be read in context, not in isolation.
iii.Extrinsic materials should be used where necessary.
iv."In all cases, but especially in legislation enacted to achieve the important social objectives, the purposive of approach is the correct one to follow"
36.This approach to the statutory provisions leads to a conclusion that the Family Actual Means Test was not intended to produce absurd results. The decision of Madgwick J in Leah v Secretary, Department of Employment, Education, Training and Youth Affairs (1998) 86 FCR 230, provides specific and ample evidence of this justification.
37.The Department appears to have held the view that it could not have considered an application to alter the base tax year under section 1067G-G5 and 1067G-G6. The SSAT noted that there is nothing in those sections which would require such a strict interpretation. I also agree that the department would not have been so bound. However, the application would need to have been made before the end of the payment period, that is, 21 November 2004 (Secretary, Department of Family and Community Services v Butt (2000) 31 AAR 399). There is no power to consider an application after that date. As the applicant did not do so, it cannot now be considered.
38.Therefore, the Tribunal finds that while there was sufficient power for an application to be considered to alter the base tax year, the fact that an application was not made, now results in the applicant being unable to rely upon that section. Consequently, the applicant satisfies the requirements of having a parent who is a "designated parent" and therefore, the Family Actual Means Test must now apply in her case.
39.In relation to the outcome of the assessment of that test, even though evidence was presented by Mr Reid to indicate his income for the 2003/04 financial year may have been less than the 2002/03 financial year, this was not sufficient to displace a finding that his total actual means would have precluded the applicant from qualifying for youth allowance. On that basis, Ms Reid has been overpaid to the extent of the allowance paid ($5028.87).
§ Issue (ii) – Is the Overpayment a Debt Due to the Commonwealth?
40.Section 1223(1) prescribes that where a social security payment is made and the recipient was not entitled “for any reason”, to that payment, then the amount is a debt due to the Commonwealth.
41.Consequently, there is, as a strict matter of law, a debt due to the Commonwealth as there was no legal entitlement to the payments of youth allowance for the period for which a debt has been raised.
§ Issue (iii) – Can the Debt be Written-Off, Waived or Should it be Recovered?
Can the Debt be Written Off?
42.A debt can be written off under section 1236 only if it is irrecoverable. Section 1236(1A) and 1236(1B) outline the circumstances when the Secretary may write off a debt. These are essentially circumstances where the debtor has, or is unlikely in the future to have, a capacity to repay the debt.
43.There was no circumstance presented in the evidence, either now or anticipated in the future, which makes those provisions applicable to the applicant. Therefore, it could not be said that the debt might not be recoverable at law. Therefore write off is not appropriate.
Can the debt be waived?
44.A debt can be waived under section 1237 of the Act. However, the Secretary may only waive a debt in circumstances set out in the provisions specified in section 1237(1). In this case, there appears to be two other provisions which may be relevant. These are sections 1237A and 1237AAD:
“Waiver of debt arising from error
Administrative error
1237A.(1) Subject to subsection (1A), 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.
1237A.(1A) Subsection (1) only applies if:
(a)the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or
(b)if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;
whichever is the later.
Waiver in special circumstances
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 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.”
45.In applying these provisions to the present case, section 1237A(1) is only relevant where there is an administrative error. Section 1237A(1A) makes section 1237A(1) applicable only where the debt is not raised within a period of 6 weeks from the first payment that caused the debt.
46.The Tribunal noted that the applicant, and her father who had the responsibility to provide certain information, did provide information required and that the payments received by the applicant, were received in good faith. The respondent acknowledged the provision of taxation returns by the applicant’s father, but argued that it was not the sole error of the Commonwealth, as Mr Reid provided incorrect information in that he stated that he did not have an interest in a trust in the base tax year.
47.As the Tribunal has set out earlier, it regards that interpretation as being too narrow in the present circumstances, where the applicant’s father had entered into a contract for sale of the shares in his unit trust prior to 30 June 2003. His interest on 1 July 2003 was a legal technical interest only and with no specific involvement or income from the trust after that date, with the exception of a return of capital on settlement. After taking account of that finding, as well as noting that the department had the benefit of relevant financial information about the applicant and her father's financial position, together with the perception left with the applicant and her father that "income" was the only relevant consideration, it is difficult to see how the error was not solely the error of the Commonwealth. There have been other occasions where it has been held that the Commonwealth must waive the whole of the debt where an allowance was received in good faith and as a result of incorrect advice from a departmental official (Re Chen and Secretary, Department of Family and Community Services (1999) AATA 151).
48.In this case, the perception created by the Department has been exacerbated by the fact that considerable financial information had been provided to the Department for it to be able to make an assessment using the Family Actual Means Test. It also had on record from the time the applicant made application in 2001, that Mr Reid had an interest in a trust. Even with that knowledge, the Department failed to make a proper assessment. The evidence in this case is compelling and points to the error being attributable solely to the Commonwealth.
49.In addition to the finding above, section 1237A (1A) provides that the Secretary must waive the right to recover where the debt (or proportion of the debt) is not raised within a period of 6 weeks from the first payment that caused the debt. That is clearly the case here as the applicant was paid for almost a full year before the Department took any action, and that was after a cross match with ATO records, notwithstanding the material available to the Department. In the circumstances, the Tribunal finds that the error was solely attributable to the Commonwealth and that section 1237A has been satisfied in favour of the applicant.
50.Even if the Tribunal cannot attribute error solely to the Commonwealth and thereby waive the debt under s 1237A of the Act, the Tribunal has concluded that there are “special circumstances” which would equally exonerate the applicant, as provided for by section 1237AAD.
51.All three of the limbs of section 1237AAD must be satisfied before the debt may be waived. In relation to the first limb, the question is whether the false information provided, or the continuation of Centrelink acting on inaccurate information upon which the payment was calculated, was done so “knowingly”. This term must be given its ordinary meaning, and actual knowledge rather than constructive knowledge must be the test here. As observed previously, there is nothing in these circumstances which would result in any other reasonable conclusion than Mr Reid having honestly believed he had sold his interest some 7 months earlier and that he effectively had no further interest or income from the trust in 2003/04. Therefore, Mr Reid’s answers were honestly believed and were a practical outcome of his understanding of the position at that time. The Tribunal accepts that this too was the position of Mr Reid’s daughter, the applicant, at that time.
52.In relation to the second limb of that section, it must be determined whether there are special circumstances (other than financial hardship alone) which make it desirable to waive the debt. Determining whether the circumstances are “special” depends on the purpose of the power in that section. In Beadle v Director-General Social Security (1985) 60 ALR 225 at 228, the Full Court of the Federal Court determined that limits of that term cannot be specified with any real precision.
53.The respondent also referred the Tribunal to Dranichnikov v Centrelink (2003) 75 ALD 134 at 148. In that case it was stated:
“To some extent, the question whether there were special circumstances must depend on how it came about that the error occurred.”
54.In that case also, the Tribunal found “special circumstances” involves something unusual or exceptional, particularly where there are degrees of culpability or intensity for example. These characteristics may relate to personal circumstances, financial circumstances or other matters.
55.While the discretion in determining “special circumstances” is a broad one, after taking account of all of the circumstances, the Tribunal must be satisfied that it is proper to exercise discretion in the applicant’s favour. To demonstrate “special circumstances”:
(a)an acceptable explanation of the circumstances to justify acceptance of the applicant’s version of the facts would need to be shown;
(b)the applicant should not have taken any action that might be seen to disadvantage the respondent or to avoid compliance with the law;
(c)the merits of the application must be properly weighed; and
(d)the period of time during which the circumstances were in existence will be relevant.
56.The respondent also submitted that in exercising discretion in relation to "special circumstances", a decision maker must have regard to whether "…he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the…Act…" (Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61). The respondent also urged the Tribunal that the facts of this case could not be regarded as a "special circumstance" (Schulze and Secretary, Department of family and Community Services [2004] 81 ALD 636). The respondent also submitted that the Tribunal must consider that taxpayers are entitled to expect that debts due to the Commonwealth will be recovered (Director General of Social Services v Hales (1983) 47 ALR 281.
57.The Tribunal has considered these principles and taken them into account in forming its conclusions in this decision. It is also conscious of the judgment of French J in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 161 where His Honour said that in addition to the three conditions set out in section 1237 AAD, “[T]he exercise of the discretion thus enlivened may be informed by other considerations which were not required to support satisfaction of the three necessary conditions. It is important in this case to say however that in some cases the satisfaction of the three conditions may be sufficient to persuade the Secretary to waive without reference to any further matter."
58.Having considered all the relevant evidence and the weight to be placed on the various aspects of the evidence, the Tribunal finds that there are “special circumstances” in this case which justify waiving the debt in full. The factors contributing to this decision are -
a.As determined earlier, Mr Reid had sold an equitable interest in his shares in the trust prior to 30 June 2003 and effectively had no further dealings with the trust or any further income from the trust from 1 July 2003 (other than attending to settlement matters in early July 2003);
b.Centrelink was provided with relevant financial information through the tax returns of Mr and Mrs Reid, together with other information about their assets and liabilities, and therefore, it was in a position to properly assess the applicant’s eligibility for youth allowance. Given that the initial enquiry was made in December 2003, followed by a formal application on 5 January 2004 with formal approval for youth allowance being made on 2 February 2004, Centrelink had a reasonable opportunity to assess the application before granting the youth allowance as well as at any time during the 2004 year while the allowance was being paid.
c.The assessment referred to in b. above was further facilitated by historical records in Centrelink of Mr Reid’s interest in a Trust from the time of the applicant’s original application in 2001.
d.A Freedom of Information application revealed information whereby Centrelink has documented that the applicant should have been assessed under the (then) current financial year, and not under the base tax year.
e.Despite the applicant and her father asking for a delay in implementation of the decision of the SSAT, the applicant’s father then made an offer to pay the debt. This was rejected and the applicant’s wages were garnisheed. As this caused some embarrassment, the applicant’s father submitted that he immediately found the money to pay the debt on the basis that, if successful at this Tribunal, then any amount so ordered would be refunded to the applicant or her father.
59.In light of all of the circumstances outlined in the evidence which are relevant to s1237AAD, Ms Rachel Reid’s circumstances do have the characteristics of “special circumstances” under the law and which point to an unfairness if the applicant had to repay the debt to the Commonwealth.
60.The Tribunal is also satisfied that according to the third limb of the test - subsection (c) of s1237AAD of the Act - that it is more appropriate to waive the debt rather than write off the debt. The legal requirements for write off in this case are not satisfied. In the current circumstances, waiver of the debt is the appropriate response.
61.Consequently, there are “special circumstances” in this case which justify waiver of the debt.
Decision
62.It is determined that the decision under review is set aside. The Respondent is to refund any debt amount already repaid by the applicant or her father in relation to this Youth Allowance debt.
I certify that the 62 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, Senior Member
Signed: .....................................................................................
Legal Research OfficerDate/s of Hearing 18 July 2005
Date of Decision 6 December 2006
The Applicant was represented by her parent Mr S. A. Reid
For the Respondent Ms J Forsythe
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