Robert and Mary Charlton and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2013] AATA 692

[2013] AATA 692 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2012/3228, 2012/3229, 2012/3230
Re	Robert and Mary Charlton
APPLICANT
And	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT

DECISION

Tribunal	Mr S. Webb, Member
Date	27 September 2013
Place	Dubbo, NSW

The decision under review is varied to the extent that the amount of Mr Charlton’s Age Pension debt is $8,693.31; Mrs Charlton’s Partner Allowance debt is $10,448.63 and her Age Pension debt is $2,869.65.

The matter is remitted to the Secretary to determine the debt amounts that are presently outstanding.

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

Mr S. Webb, Member

SOCIAL SECURITY – Age Pension – Partner Allowance – small private business – annual income based on taxation returns – loss reported in drought years - increased income in subsequent years – no record increased annual business income reported – business income not taken into account - over payment – debt – no action taken to rectify notices setting out incorrect income – no special circumstances – decision varied

Social Security Act 1991 ss 8, 55, 771KA, 1064, 1068, 1223, 1236, 1237A, 1237AAD

REASONS FOR DECISION

Mr S. Webb, Member

27 September 2013

1. Robert and Mary Charlton are Age Pension recipients who have been married for many years. Mr Charlton operates an agricultural services business – Dubbo Plunge Dipping. The primary business is dipping sheep. Until 2002, the business provided their sole income. Business suffered during the drought, however, causing Mr and Mrs Charlton to seek income support. In 2002 they were granted Newstart Allowance. In 2003 Mr Charlton moved onto the Age Pension and Mrs Charlton moved onto Partner Allowance. From 2004, business picked up, producing increasing income over subsequent years. There is a dispute about whether the increased annual business income was reported to Centrelink. From 2005 to 2011, it was not taken into account when calculating the rate of Mr and Mrs Charlton’s social security payments.

2. In 2011, Centrelink raised overpayment debts against Mr and Mrs Charlton for the period from 22 June 2006 to 16 August 2010. They exercised their rights to seek reconsideration and review. The present applications follow the Social Security Appeals Tribunal decision to affirm the overpayment debts and the finding that the debts cannot be waived or written off in the circumstances.

3. The issues to be determined with respect to the period from 22 June 2006 to 16 August 2010 are:

   (a)have Mr and Mrs Charlton been overpaid amounts of Age Pension or Partner Allowance; and if so

   (b)what are the amounts of the overpayments;

   (c)are the overpayments debts for which Mr or Mrs Charlton are liable; and if so

   (d)are there grounds to write-off or waive the debts, in whole or in part, in the circumstances?

   Have Mr and Mrs Charlton been overpaid amounts of Age Pension or Partner Allowance?

4. The answer to this question is Yes.

5. There appears to be no dispute about this point. Under s 8 of the Social Security Act 1991 (the Act), subject to s 1074 and s 1075, the net income, or profit, of Mr Charlton’s sheep dipping business in any year is an ‘income amount’ within the meaning of ‘income’ that is to be treated as part of his ordinary income in that year. Section 55 provides that the rate of Age Pension is to be calculated under s 1064. The ordinary income test under s 1064-E1 and E2 requires the annual ordinary income of each member of a couple to be added together and divided by two. Section 771KA requires that the rate of a person’s Partner Allowance is to be calculated using the rate calculator set out in s 1068 – the ordinary income of the person’s partner is to be taken into account in accordance with s 1068-G2 and s 1068-G9.

6. The net income of Mr Charlton’s Dubbo Plunge Dipping business can be seen in the annual tax returns for the business his accountant prepared and lodged. The net business income for each year is set out in the following table –

Year	Net Income Amount	Date Business Accounts and Tax Returns finalised[1]
2002-2003	$5,756[2]	25 March 2004
2003-2004	-$1,100[3]	17 December 2004
2004-2005	$4,495[4]	8 September 2006
2005-2006	$1,798[5]	8 September 2006
2006-2007	$9,712[6]	18 October 2007
2007-2008	$25,941[7]	6 October 2008
2008-2009	$26,761[8]	17 July 2009
2009-2010	$31,386[9]	29 July 2010
2010-2011	$31,547[10]	16 August 2011

[1] Filing dates are listed on the Tax Agent Portal document in Exhibit 2.

[2] T20 folios 146-147.

[3] T18 folios 133-134.

[4] T17 folios 121-122.

[5] T16 folio 107.

[6] T15 folio 93.

[7] T14 folio 81.

[8] T10 folio 62; T36 folio 204.

[9] T35 folio 191.

[10] T34 folio 178.

1. Centrelink records reveal that no business income from Dubbo Plunge Dipping was taken into account when calculating the rate of Mr Charlton’s Age Pension and Mrs Charlton’s Partner Allowance and Age Pension in the period from 22 June 2006 to 16 August 2010.

2. It follows that the rate of Age Pension and Partner Allowance that was paid to Mr and Mrs Charlton was incorrect; each was overpaid an amount of Age Pension and Mrs Charlton was overpaid an amount of Partner Allowance.

   What are the amounts of the overpayments?

3. From 2002, Mr and Mrs Charlton were given separate notices under s 68 of the Social Security (Administration) Act 1999 (the Administration Act) informing them of their obligation to notify Centrelink of any change in their respective incomes[11]. There is some dispute about whether all of the notices and statements were received – Mr and Mrs Charlton assert that there were problems with the post and that they do not recall receiving each of the notices and statements from Centrelink. I am satisfied that each of Mr and Mrs Charlton was notified of the obligation to inform Centrelink of any change in income in respect of Mr Charlton’s Age Pension and Mrs Charlton’s Partner Allowance prior to 22 June 2006. This is consistent with their own evidence that they understood this to be so. I note that Mrs Charlton informed me that she had but little knowledge or involvement in her husband’s dipping business, and she relied on him to inform Centrelink of changes in his business income. Despite this, Mrs Charlton attended Centrelink offices in Dubbo on a number of occasions, such as on 25 July 2007, seeking and providing information about income and assets.[12]

   [11] T48, T53, T54 and T55.

   [12] ST22 folio 702.

4. On 5 July 2005 Mr Charlton was informed that, for the purposes of calculating the rate of his Age Pension, his combined annual income was $192.42[13]. On 5 July 2006, 4 July 2007, 16 January 2008, 14 January 2009, and 31 December 2009 he was notified that the annual income from his business was assessed as $0 and, if this was incorrect, he should notify Centrelink within 14 days.[14] There is no evidence that he did so.

   [13] T55 folio 470.

   [14] T55 folios 473, 481, 486, 491 and 496.

5. On 11 April 2007, Mrs Charlton was sent an account statement showing that her income was $3.89 per fortnight on 9 January 2007; she was required to inform Centrelink if this was not correct within 14 days[15]. Subsequently, she was sent similar statements or notices on 10 occasions prior to 21 October 2009.

   [15] T54 folio 398-400.

6. On 7 December 2009, Mrs Charlton was given a Transfer to Age Pension – Income and Asset Review form, which she completed and lodged on 4 January 2010[16].  She also provided a profit and loss statement for Dubbo Plunge Dipping covering the period from July to September 2009, in which the business apparently made a loss of $1,604.89[17]. On 5 January 2010 Mr Charlton lodged an Income and Asset Review form, in which he stated in respect of Dubbo Plunge Dipping “Now have made a profit provided full tax return with profit and loss”[18]. It appears that he provided a copy of the 2008-2009 tax return and a Profit and Loss Statement for the business for the period July 2009 to September 2009. The 2008-2009 tax return records a business profit of $26,761[19], whereas the Profit and Loss Statement records a business loss of $1,604.89[20].

   [16] T5.

   [17] T52 folios 360-361 refer.

   [18] T4 folio 27.

   [19] T10 folio 62.

   [20] T10 folio 51.

7. It appears that Centrelink proceeded on the basis of the business loss for July to September 2009 and applied no business income when calculating the rate of Mr and Mrs Charlton’s Age Pension from 8 January 2010. Centrelink appears to have taken no action to amend Mr and Mrs Charlton’s income records for 2008-2009 on the basis of Mr Charlton’s 2008-2009 tax return.

8. On 4 August 2010 Centrelink undertook a data matching exercise with the Australian Tax Office.[21] On 17 August and 1 September 2010, Mr Charlton provided Centrelink with additional information and annual tax returns from 2002-2003 to 2008-2009. Despite this, however, it appears that Centrelink did not amend Mr and Mrs Charlton’s Age Pension records until 25 November 2011.

   [21] T8 folio 45

9. During the hearing, the Secretary handed up submissions in which it is conceded that “Mr Charlton could reasonably be said to have become aware of his business income at the time his annual tax returns were prepared by his accountant” and that these dates should be used as the ‘Date of Effect for the purpose of income assessment’[22]. On 28 August 2013, the Secretary filed a document setting out the alleged overpayments to Mr and Mrs Charlton recalculated on this basis.[23]

   [22] Secretary’s Further Submission regarding Assessment of Income, 19 August 2013.

   [23] Exhibit 9.

10. I have considered the revised amounts, which have not been challenged, and I am reasonably satisfied that they are correct. The overpayment amounts are $8,693.31 for Mr Charlton in respect of Age Pension from 22 June 2006 to 16 August 2010; $10,448.63 for Mrs Charlton in respect of Partner Allowance from 22 June 2006 to 7 February 2010; and $2,869.65 for Mrs Charlton in respect of Age Pension from 8 February 2010 to 16 August 2010.

    Are the overpayments debts for which Mr or Mrs Charlton are liable?

11. The answer to this question is Yes.

12. Under s 1223, if a person receives a social security payment in an amount that exceeds his or her entitlement, the amount of the excess is a debt due to the Commonwealth.

    Are there grounds to write-off or waive the debts, in whole or in part, in the circumstances?

13. The answer is No.

14. Debts may only be written off under s 1236 or waived under s 1237A or s 1237AAD in certain circumstances.

15. I am satisfied that Mr and Mrs Charlton’s debts cannot be written off under s 1236, as none of the preconditioning criteria set out in s 1236(1A) are satisfied. The debts are recoverable at law. Mr and Mrs Charlton have some capacity to repay the debts, albeit somewhat limited by their financial circumstances as Age Pensioners. Their whereabouts are known and it is cost effective for the Commonwealth to take action to recover the debts by deduction from their pension payments. I note that Mr Charlton complained that deductions from his Age Pension to recover the debt are too high and these cause him financial difficulty. That is not a matter for me to determine, but it is open for him to take it up with the Secretary.

16. Waiver of the debts under s 1237A only arises in respect of “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”.

17. Mr and Mrs Charlton say that Mr Charlton lodged his annual tax returns with Centrelink each year. This, they assert, was done once Mr Charlton’s accountant had finalised the Dubbo Plunge Dipping accounts and the tax returns had been signed off. Much was said during the hearing on these points, and Mr and Mrs Charlton were given every opportunity to obtain evidence to support their case. Even though Mr Charlton was able to explain the processes he experienced in the Dubbo Centrelink office when allegedly lodging his annual tax returns, and his account was consistent with the evidence given by Mr MacDermott, Centrelink’s Central West Area Manager, no record of him having lodged tax returns in 2005, 2006, 2007, 2008 or 2009 has been brought to light.

18. I directed the Secretary to conduct further searches and to produce relevant Activity Management Records for Mr and Mrs Charlton’s accounts. These efforts did not produce information indicating that annual tax returns had been lodged as Mr and Mrs Charlton contend. Having carefully scrutinised those records, I am satisfied that there is no record indicating that Mr or Mrs Charlton lodged tax returns or up-dated their income records in respect of Dubbo Plunge Dipping in the period from 22 June 2006 to 7 December 2009. The Activity Management Records and other records from Centrelink’s holdings that appear in the T documents do not support Mr Charlton’s contention that he attended the Dubbo Centrelink office within several days of his tax returns being finalised by his accountant.

19. This is a difficult matter. Mr and Mrs Charlton struck me as straight-forward witnesses who gave their evidence without dissembling or deceit, believing their account to be true. But if their account is correct, it would follow that Centrelink made repeated and disturbing errors over a period of years, failing to record documents and information about Mr and Mrs Charlton’s income derived from the Dubbo Plunge Dipping business.

20. I am unable to resolve this issue. It is conceivable that Mr and Mrs Charlton may have faulty memories, or they may erroneously have believed that once their annual tax returns were lodged that was sufficient to meet Centrelink’s requirements. Alternatively, it is conceivable that Centrelink made repeated administrative errors in failing to properly process or record information provided by Mr and Mrs Charlton.

21. Nevertheless, it is not necessary to go any further on this point, as I am reasonably satisfied that no part of Mr and Mrs Charlton’s overpayments debts in the period from 22 June 2006 to 4 January 2010 is solely attributable to Commonwealth error – the debts are attributable, in part at least, to their own errors in failing to correct information about their income that was set out in the Centrelink notices and statements they were sent in which no income from the Dubbo Plunge Dipping business was recorded. For this reason, alone, those parts of Mr and Mrs Charlton’s debts arising prior to 4 January 2010 cannot be waived under s 1237A.

22. On 4 January 2010, Mrs Charlton provided Centrelink with a Transfer to Age Pension – Income and Asset Review form, in which she recorded no income from any source but she provided Mr Charlton’s 2008-2009 tax return, prepared by Walker Accounting, and the Profit and Loss Statement in respect of Dubbo Plunge Dipping for July to September 2009. It is notable that the information about income that is expressly required in the Transfer to Age Pension – Income and Asset Review at question 17 includes business income. The form also notes that “Your partner has been sent a form. It is important for them to also return their form or your payments may be stopped”[24]. Mr Charlton lodged his form on 8 January 2010, in which he set out information in respect of Dubbo Plunge Dipping and stated “Now have made a profit”.[25] He provided his 2008-2009 tax return in which the net income of the business is shown to be $26,761 for that year[26]. He also provided the Profit and Loss Statement for July to September 2009, which shows an operating loss of $1,604.89 for the period.[27]

    [24] T5 folio 31.

    [25] T4 folio 27

    [26] T10 folio 62.

    [27] T10 folio 51.

23. There are several things to say about this. Firstly, the information Mr and Mrs Charlton provided indicates that Dubbo Plunge Dipping returned a profit to them of $26,761 in 2008-2009 that had not been taken into account when calculating the rate of Mr Charlton’s Age Pension and Mrs Charlton’s Partner Allowance. Secondly, Mr Charlton clearly stated that the Dubbo Plunge Dipping business was then profitable. Thirdly, as with many businesses, the Profit and Loss Statement for July to September 2009 suggests that the profitability of the business fluctuated. Mr Charlton’s evidence before me is that business is very quiet in the July to September period in any year. Nonetheless, a Centrelink officer noted on 8 January 2010 in respect of Mrs Charlton that “cust lodged profit and loss for ptr as ITR provided for last year show high income but this will not be the case this year”[28]. Fourthly, there is no record of Mr or Mrs Charlton providing additional information about the projected annual income of Dubbo Plunge Dipping for the 2009-2010 year, or information about business activity, profitability or receipts in the period from October to December 2009. No further information was required of them, or provided by them, about the business and the net income they derived from it until August 2010.

    [28] T52 folio 358.

24. I am satisfied that Centrelink’s decision in January 2010 to act upon the most recent information provided by Mr and Mrs Charlton about their income, in the form of the Profit and Loss Statement for the period from July to September 2009, was not an error to which part of Mr or Mrs Charlton’s debts are solely attributable. The resulting debt is, at least in part, attributable to the information provided by Mr and Mrs Charlton. For this reason, the debts arising in the period from 4 January 2010 to 16 August 2010 cannot be waived on grounds of error under s 1237A.

25. The sole remaining issue is whether any part of the debts for which Mr and Mrs Charlton are liable may be waived on the grounds of special circumstances under s 1237AAD.

26. I am satisfied that no special circumstances exist that render it desirable to waive all or part of these debts.

27. Mr and Mrs Charlton are both recipients of the Age Pension. They suffer from health problems. Mr Charlton suffers from back pain and heart complaints, but by his own account he is still able to work in the Dubbo Plunge Dipping business. Mrs Charlton suffers from high blood pressure that is exacerbated by stress. Health complaints of this kind are not unusual or uncommon in those above pension age.

28. Mr and Mrs Charlton have supportive children in the Dubbo area. Mrs Charlton has a sister in Victoria who has experienced health issues, with whom she stays from time to time. Recently, she has been staying with her sister in order to avoid the stress associated with Mr Charlton’s pursuit of these proceedings. I understand that this is a temporary measure.

29. I accept that Mr and Mrs Charlton do not have significant assets or financial resources to draw upon. They live in rented accommodation that is presently shared with a daughter. Other than the debts that are at the heart of these proceedings, they have no significant liabilities. Their business is presently viable and productive of modest net income, from which they benefit.

30. Certainly, it is unfortunate for people of Mr and Mrs Charlton’s age to face substantial debts which they believe are not of their making. But they have had the benefit of payments over their entitlements for a number of years, placing them in a better position than other recipients of the Age Pension. The present evidence does not establish that Centrelink made significant errors or provided wrong information to the extent that anything unfair or unintended or unjust has occurred.

31. To my mind, these circumstances, taken separately or together, do not render Mr and Mrs Charlton’s case out of the ordinary course, and they do not rise to the level of special circumstances that render it desirable to waive all or part of the debts for which they are liable.

    Conclusion and decision

32. Mr and Mrs Charlton have been overpaid amounts of Age Pension and Partner Allowance. The amounts are $8,693.31 for Mr Charlton in respect of Age Pension from 22 June 2006 to 16 August 2010; $10,448.63 for Mrs Charlton in respect of Partner Allowance from 22 June 2006 to 7 February 2010; and $2,869.65 for Mrs Charlton in respect of Age Pension from 8 February 2010 to 16 August 2010. These amounts are debts due to the Commonwealth for which Mr and Mrs Charlton, respectively, are liable. There are no grounds to write off or waive the debts. The debts have been repaid in part.

1. It follows that the decision under review is varied to the extent that the amount of Mr Charlton’s Age Pension debt is $8,693.31; Mrs Charlton’s Partner Allowance debt is $10,448.63 and her Age Pension debt is $2,869.65.

2. The matter is remitted to the Secretary to determine the debt amounts that are presently outstanding.

I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member

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

Associate

Dated 27 September 2013

Dates of hearing	4 and 17 April, 20 August 2013
Date final submissions received	28 August 2013
Applicants	In person
Solicitors for the Respondent	Hannelore Schuster, Program Litigation and Review Branch, Department of Human Services