Rickells and Secretary, Department of Family, Community Services and Indigenous Affairs

[2007] AATA 1293

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1293

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2006/1141

GENERAL ADMINISTRATIVE  DIVISION		)
Re		BRIAN RICKELLS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Professor I Shearer, Senior Member

Date3 May 2007

PlaceSydney

Decision The decision under review is affirmed.

....................[sgd]..........................

Professor I Shearer
  Senior Member

CATCHWORDS

SOCIAL SECURITY – age pension – overpayment – eligibility for age pension affected if claimant partnered – disclosure of earnings – travel allowances – salary sacrifice - notification of Centrelink – debt raised – no debt waiver – no special circumstances – decision under review affirmed

CASE LAW

Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Department of Social Security v. Hulls (1991) 22 ALD 570
Department of Social Security v. Smith (1991) 23 ALD 277; 30 FCR 56;

Department of Social Security v. Hales (1998) 51 ALD 695; 82 FCR 154;

LEGISLATION

Social Security Act 1991 - sections 1064, 1064-A1, 1064-A2, 1072, 1223, 1223(1), 1237A(1), 1237AAD, 1283

Social Security (Administration) Act 1999 - section 109(1), 110, 129

REASONS FOR DECISION

3 May 2007 Professor I Shearer, Senior Member       

1.      The decision under review by the Tribunal is the decision of the Social Security Appeals Tribunal (“the SSAT”), dated 11 August 2006, affirming the decision of the Respondent to raise and recover an age pension debt of $2,483.38.

2. The essential issue for the Tribunal is whether the Applicant was overpaid in his pension entitlements and, if so, whether this amount constitutes a legally recoverable debt under section 1223(1) of the Social Security Act 1991 (“the Act”).

3. Section 1283 of the Act provides for review of decisions of the SSAT by the Tribunal.

BACKGROUND FACTS

4.      The Applicant, Mr Brian Rickells, is presently aged 71. He is in receipt of an age pension, to which he became entitled at the age of 65.

5.      Mr Rickells is married. His wife, Carole Rickells, works for a company on a part-time basis.

6. In accordance with the Rate Calculator annexed to section 1064 of the Act, the rate of age pension is affected by whether a claimant is partnered or not. Mrs Rickells’s earnings were disclosed to Centrelink at the time when Mr Rickells first claimed the pension, and thereafter. Mr Rickells was paid the pension at a reduced rate as a consequence of his wife’s earnings and of his other income.

7.      Mr Rickells was granted the age pension on 23 January 2002 with effect from 22 December 2001. He was sent an information notice under the Social Security (Administration) Act 1999 (“the Administration Act”) advising him that his regular payment of the age pension was calculated using a combined income of himself and his wife of $21,600.42. The notice also advised Mr Rickells that he should inform Centrelink of any increases in his combined income. Mr Rickells was sent the same notice at intervals thereafter.

8. Mr Rickells first came into dispute with Centrelink over the calculation of his age pension in October 2002. His wife had undergone an eye operation and was on unpaid leave from her employment from 10 to 23 September 2002. As a result, the combined income of the couple was reduced in that period. On 1 October 2002 Mr Rickells submitted to Centrelink in person the medical certificates covering his wife’s illness and an application for review of his rate of regular payment from pay day 30 August 2002. Centrelink refused the application on the ground that Mr Rickells had not notified it of the change of circumstances within the period of 14 days from the commencement of the change, as required by section 110 of the Administration Act. Mr Rickells applied for a review of his entitlements, which was refused. The SSAT, on appeal, by its decision dated 29 January 2003, upheld Mr Rickells’s claim on the ground that Centrelink had misapplied the Administration Act. In the view of the SSAT the applicable section was section 109(1) of that Act which allows for a period of 13 weeks from the date of the decision for the submission of an application to the Secretary for review under section 129 of the same Act. Accordingly, it ordered that the decision be set aside and the matter remitted to Centrelink with directions that arrears of age pension were payable to Mr Rickells for the period 10 to 23 September 2002.

9.      Although not part of the present proceedings, the circumstances surrounding the first dispute drew to the attention of Mr Rickells the requirement that all changes of circumstances be notified to Centrelink within 14 days. He had stated that he had previously been unaware of that requirement. In his letter to Centrelink dated 4 October 2002 he declared that “In future now I know and will abide by the ’14 day’ rule”. This element of the history of the case is reflected in the later decision to waive part of his debt to the Commonwealth (see paragraph 15 below of these reasons).

10.     On 1 December 2005 Centrelink received a data match from the Australian Taxation Office (“ATO”) which indicated that the income Mrs Rickells had declared to the ATO in the financial year 2004/2005 was $14,740, whereas her income as declared by her husband to Centrelink was $10,921. Centrelink wrote to Mr Rickells on 1 December 2005 seeking clarification of the apparent discrepancy. It also wrote to Mrs Rickells’s employer.

11.     On 9 January 2006 a Centrelink delegate decided, after reviewing the taxation and claim records back to 3 January 2002, that Mr Rickells had been overpaid the age pension in the amount of $5,089.85 during the period 3 January 2002 to 28 December 2005.

12.     On 12 January 2006 Mr Rickells wrote a letter to Centrelink disputing this decision. He wrote further letters during the months of January and February setting out his objections. The decision was, however, affirmed on reconsideration.

13.     Shortly thereafter it was discovered within Centrelink that Mrs Rickells’s travel allowances had not been deducted from the amount of her income in error. The true figure of the overpayment was assessed at $2,881.74.

14. An Authorised Review Officer (“ARO”) spoke to Mr Rickells by telephone on 22 March 2006 advising him of this correction. By a letter dated 27 March 2006 the ARO decided to vary further the amount recoverable by finding that the debt for the period 3 January 2002 to 30 October 2002 should be waived under section 1237 of the Act. The debt as thus recalculated was assessed at $2,483.38.

15.     The reason why the earlier part of the debt was waived was stated by the ARO in her decision dated 27 March 2006 as follows:

“I have read the notes associated with an earlier appeal taken to the SSAT and your letter dated 4 October 2002. I note that you advised that you had no recollection of receiving any age pension letters prior to this date, and that you were unaware of the 14 day notification provisions, but stated that ‘in future now I know I will abide by “the 14 day rule”. …In determining whether a customer received an amount in good faith, the decision maker must look to what the customer actually knew, rather than what they could reasonably have been expected to know. Knowledge or notice of an irregularity in the payment is not enough to establish that the customer lacked good faith. It is essential to consider all the circumstances of the case, including information given to the customer in the form of letters and other literature, interviews, and phone contact, which may help to establish the customer’s reasonable expectation about their payments, information provided by the customer about their circumstances, which may help establish the customer’s expectations about future payments and the impact of the new information they provided to Centrelink. Therefore I have decided that it is appropriate to waive that part of the debt, i.e. from 3/1/02 to the date of your letter, 4/10/02 under the ‘good faith’ provisions of s1237A of the SSA.”

16.     Being still dissatisfied with the decision to raise any debt against him for overpayment, on 10 May 2006 Mr Rickells appealed to the SSAT.   On 11 August 2006 the SSAT affirmed the decision under review.

THE APPLICABLE LAW

17.     The law relevant to this application is the Social Security Act 1991 (“the Act”), supplemented by the Social Security (Administration) Act 1999 (“the Administration Act”).

18. Eligibility for the age pension is determined by, among other things, the income of the person and their partner, if they are a member of a couple. The way income affects the rate of age pension payable is determined by provisions contained in the method statement found at section 1064-A1 of the Act. Step 5 of this method statement refers to “ordinary income” and to the use of Module E – Ordinary Income Test - of Pension Rate Calculator A. Section 1064-A2 provides that the combined income of a couple is to be assessed.

19. Section 1072 defines the general meaning of “ordinary income”:

“1072. A reference in this Act to a person’s ordinary income for a period is a reference to the person’s gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 2 or 3.”

20.     Divisions 2 and 3 are not applicable to the present case. However, certain allowances that reimburse expenditure by the person such as travel allowances are allowable deductions.

21. Section 1223(1) of the Act relates to overpayments:

“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.”

EVIDENCE AND ARGUMENTS AT THE HEARING

22.     The applicant appeared in person and gave evidence. He tendered three documents: (1) an example of his wife’s pay slips; (2) an example of how he reported his wife’s weekly earnings to Centrelink; and (3) his letter to Centrelink dated 4 December 2006 protesting about the manner in which Centrelink processes his information and calculates his payments.

23.     Mr Rickells stated that there had been continuing difficulty in reporting his wife’s income because her employment was part-time and affected by seasonal demand for the products of her employer. Her earnings therefore fluctuated. Since early 2001 she has worked on average between two and four days a week.

24.     When he first applied for the age pension Mr Rickells stated that he reached an understanding with Centrelink that “a typically average” income figure would be accepted. Moreover, his understanding was that Centrelink would accept the gross income figures minus her work expenses of petrol and telephones. However, in 2006 he was told by Centrelink that only the gross figure without deductions would be accepted.

25.     He was shocked to be told that he had incurred a debt through overpayments. In January 2006 he therefore decided that the averaging system which he had previously been using for stating his wife’s income was getting him into trouble and that he would henceforth fax to Centrelink each fortnight the exact details of his wife’s income for that period.

26.     He raised the issue of his wife’s salary sacrifice into superannuation of $20 per week, which he deducted from gross income along with travel and telephone expenses. Centrelink had denied salary sacrifice as an allowable deduction, since those payments it regarded as a voluntary after tax contribution.

27.     Mr Rickells expressed his sense of frustration in dealing with Centrelink. He always found himself speaking to a different person “because when you ring them you could be talking to a person in any city in Australia”. He lacked any confidence in Centrelink’s ability to calculate his entitlements correctly.

28.     Mr Rickells also gave details of his health problems, including a stroke, which he said were in part attributable to the worry over his pension.

29.     The Respondent called to Mr Andrew Howells of the Data Matching Team of Centrelink, who gave evidence by telephone. He had prepared calculations of Mr Rickells’s entitlements according to the Earnings Apportionment Tool set out in the last four pages of the Secretary’s written Statement of Facts and Contentions, submitted to the Tribunal. On the basis of these figures he was satisfied that Mr Rickells had been overpaid by the amount claimed in the present proceedings. These figures corresponded with the Entitlement Calculations and Debt Report documents contained in the T-Documents (T60).

30.     The Respondent tendered the T-Documents, which were received into evidence.

31.     The Respondent also put into evidence the reply received from Mrs Rickells’s employer to the inquiry by Centrelink dated 22 February 2007 regarding the nature of Mrs Rickells’s superannuation contributions. The employer’s responses to the questions were as follows:

“1. Does Mrs Rickells voluntarily contribute to superannuation? Answer: Yes.
“2. Is this a before tax or after tax contribution? Answer: After.
“3. Is this a ‘salary sacrifice’ arrangement? Answer: No.
“4. Between 20 December 2001 and 16 December 2005 did Mrs Rickells participate in salary sacrifice arrangements for superannuation? Answer: No.”  

32.     Mr Rickells was unable to point to any error of law or fact in the decision under review. He presented a general argument that the calculations of Centrelink were not reliable “because of all the chopping and changing”. The reporting system itself was, in his view, impossible. Communications with Centrelink were made difficult.

33.     In the alternative to a recalculation of the figures that might lead to a decision that there was no debt owed to the Commonwealth, Mr Rickells argued that the debt should be waived by the Commonwealth.

34. For the Respondent it was contended that the recalculation of Mr Rickells’s entitlements, as described in evidence by Mr Howell, had been meticulous. A debt was thus raised under section 1223 of the Act.

35.     The debt calculation method used in the present case was the correct one. Mrs Rickells’s weekly earnings (as supplied by her employer) had been apportioned into fortnights coinciding with the fortnightly payment period of Mr Rickells’s age pension. The apportioned earnings data had then been transferred into a Summary of Changes sheet of the overpayment calculation. The data recorded in the Summary of Changes was then used to calculate the correct entitlement to age pension. The correct entitlement was then compared to the actual fortnightly amounts paid in each fortnight.

36.     Regarding the issue of alleged salary sacrifice the Respondent submitted that there was no such arrangement. Reference was made to the definition of ‘salary sacrifice’ in the ATO publication Employees’ Guide to Salary Sacrificing for Superannuation, and to the statement by Mrs Rickells’s employer.  Thus after tax contributions to superannuation could not be deducted from Mrs Rickells’s earnings for the purpose of calculating her, and Mr Rickells’s, combined incomes.

37.     In response to Mr Rickells’s alternative argument that the debt should be waived, there could be two possible bases for such waiver, neither of which should be held to exist in the present case:

a)Section 1237A(1) of the Act makes waiver mandatory where a debt is attributable solely to an administrative error by the Commonwealth if the debtor received in good faith the payment that gave rise to the debt. It could not be accepted that in the present case the overpayment could be attributed solely to error by Centrelink. The primary cause of the debt was Mr Rickells’s failure to notify increases in combined income.

b)Section 1237AAD of the Act authorises waiver of a part or the whole of a debt where there are ‘special circumstances (other than financial hardship alone)’ that make it desirable to waive the debt. Such special circumstances did not exist in the present case.

CONCLUSIONS

38.     I am satisfied that the debt raised by the Commonwealth against Mr Rickells has been correctly calculated. The process by which that debt figure has been arrived at is necessarily complex and detailed, but I am impressed by the thoroughness with which the work has been carried out. Mr Rickells did not attempt to point to any methodological or arithmetical errors in this calculation.

39.     In particular, I am satisfied that Mrs Rickells’s after tax voluntary contributions to superannuation did not constitute a salary sacrifice scheme that should be regarded as reducing her gross income.

40. In my view the Respondent’s argument regarding the application of section 1237A(1) of the Act should be accepted. It is true that error was discovered in Centrelink’s earlier calculations leading to the first SSAT decision in 2002 (paragraph 8 above of these Reasons). Error attributable to Centrelink was also discovered, and corrected, in relation to Mrs Rickells’s travel expenses (paragraph 13 above of these reasons). However the basic errors leading to overpayment of the age pension were attributable to Mr Rickells’s failure to calculate properly his wife’s gross income, and thus their combined income, through inadequate notification of changes in that income. There should therefore be no waiver of the debt arising from error.

41.      Regarding the second of the two bases on which the Secretary might waive a debt – special circumstances – I do not consider that special circumstances exist in the present case. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 the AAT held that, for special circumstances to exist, it must be possible to say that the circumstances in the case in question are “markedly different from the usual run of cases.” See also Department of Social Security v. Hulls (1991) 22 ALD 570. In Department of Social Security v. Smith (1991) 23 ALD 277 it was held that the circumstances need to be so unusual or exceptional that strict application of the law would be unjust, unreasonable, inappropriate or unjustified.

42.     The Respondent contended that Mr Rickells is financially secure and that indeed he had already repaid the debt. That, however, does not dispose of the issue. As was stated by French J in Department of Social Security v. Hales (1998) 51 ALD 695:

“The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are few cases in which, having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.” (at 51 ALD 703).

43.     Taking these observations into account, I am, however, not persuaded by the evidence that special circumstances exist in the present case. Waiver would not be appropriate.

44.     I have some sympathy for Mr Rickells in the course of his dealings with Centrelink. Communications have been difficult in the past, and to that extent it might be said that he has achieved a moral victory through these proceedings. But the faults have not been one-sided and in my view there is no reason to disturb the decision under review.

DECISION

45.     The decision under review is affirmed.

I certify that the 45 preceding paragraphs are a true copy of the reasons for the decision herein of Professor I Shearer, Senior Member

Signed:         .......K Portus..........................
  Associate

Date of Hearing  26 February 2007    

Date of Decision  3 May 2007
Appearance for Applicant               Self-represented                  

Advocate for the Respondent        Mr James Larcombe, with Ms Phyllis Lee, of Centrelink Legal Services