ROLLO SOMERSET and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2009] AATA 901
•25 November 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 901
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/3368
GENERAL ADMINISTRATIVE DIVISION ) Re ROLLO SOMERSET Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr R G Kenny, Senior Member Date25 November 2009
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
...................[Sgd]................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Pensions, Benefits and Entitlements – overpayment of family tax benefit and child care benefit in previous years – debts owed to the Commonwealth – setting off part of the debts by withholding payment of family tax benefit from a subsequent year – withholding of portion of income tax refund from a subsequent year to part of the debt – no special circumstances to prevent withholding of monies – decision affirmed.
A New Tax System (Family Assistance) Act 1999 (Cth) s 3
A New Tax System (Family Assistance) Administration Act 1999 (Cth) ss 71, 71C, 82, 84A, 87, 97, 101, 199A, 111, 142, 144 and 182
Administrative Appeals Tribunal Act 1975 (Cth) s 34JSecretary Department of Social Security v Hales (1998) 82 FCR 154
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Haidar v Secretary Department of Social Security (1998) 157 ALR 359
REASONS FOR DECISION
25 November 2009 Mr R G Kenny, Senior Member BACKGROUND
1. Rollo Somerset received payments under ANew Tax System (Family Assistance) Act 1999 (the Act) in and from the financial year 2002/2003. These were family tax benefit (FTB) and child care benefit (CCB). These benefits are paid in a financial year on the basis of the recipient’s estimates of both income earned and maintenance paid during that financial year. At the end of each financial year, the Family Assistance Office (FAO) undertakes a reconciliation process whereby it compares those estimates of income and maintenance with the actual income earned and maintenance received. The FAO then calculates the amount of FTB and CCB that should have been paid. Where there was an excess payment of FTB and/or CCB, an overpayment is raised which will be a debt owed to the Commonwealth[1]. Where there was a shortfall of FTB and/or CCB payments, further such payments are made.
[1] See s 71 and 71C, respectively, of the ANew Tax System (Family Assistance) Administration Act 1999 (the Administration Act).
2. The FAO determined that Mr Somerset had been overpaid in three financial years and raised the following debts against him:
·for the 2002/2003 financial year, a residual CCB debt of $3,139.67[2];
·for the 2003/2004 financial year, a CCB debt of $11,067.08; and
·for the 2005/2006 financial year, a CCB debt of $5,692.25 and an FTB debt of $5475.00.
[2] Centrelink documents reveal that the original debt for the 2002/2003 financial year was $5,705.32 which, on 28 January 2009, was reduced by withholding arrears of FTB for the 2006/2007 financial year in the amount of $2,565.65, leaving a residual debt of $3,139.67.
3. On 8 April 2009, the FAO completed a reconciliation of Mr Somerset’s FTB and CCB entitlements for the 2007/2008 financial year. The process revealed that he had been underpaid $2,744.11 for that year. Instead of making a payment of $2,744.11 to Mr Somerset, the FAO applied it to his 2002/2003 financial year residual CCB debt[3]. Further, Mr Somerset was entitled to a taxation refund from the Australian Taxation Office for the 2007/2008 financial year. On 20 April 2009, the FAO determined that $11,167.25 of this refund should be withheld from Mr Somerset to settle in full the amounts of his FTB and CCB debts from the 2005/2006 financial year.
[3] This was in accordance with ss 82(1)(b) and 84A of the Administration Act and reduced the debt for the 2002/2003 financial year to $395.58.
4. Both of those decisions were affirmed by an authorised review officer on 12 May 2009. The Social Security Appeals Tribunal (SSAT) affirmed the decisions on 23 June 2009.
5. At the SSAT proceedings, Mr Somerset requested that the SSAT review the original decisions which raised the debts for the 2002/2003, 2003/2004 and 2005/2006 financial years. The SSAT determined that it was unable to deal with the original debt decisions because those matters had not been the subject of intermediate review by authorised review officers. Accordingly, the SSAT limited its review to the decisions in relation to the recovery of the monies for the 2002/2003 and 2005/2006 financial years.
SUBMISSIONS
6. At the Tribunal hearing, initially, Mr Somerset again requested that the initial raising of the debts be considered. He submitted that certain income-related matters had not been taken into account by the original decision makers. He submitted that these concerned the operation of a trust in the 2002/3, 2003/4 and 2005/6 financial years and, in particular, losses which, if taken into account, would have resulted in his being attributed with significantly reduced levels of income and, consequentially, reduced levels of debt. However, he also conceded that he had not sought review by an authorised review officer of any of the three decisions relating to debt. He indicated that he still intended to do seek review on the basis that incorrect income levels were relied upon to create the debt. He also indicated that he would seek to have any debt waived[4]. In the event that the debts were correctly raised, Mr Somerset submitted that the monies owed to him for the 2007/2008 financial year, for the shortfall in FTB and for his taxation refund, should not have been withheld because of his exceptional and unforseen circumstances and the extreme hardship this caused.
[4] In particular, see s 97 of the Administration Act (where debt is attributable solely to an administrative error made by the Commonwealth) and s 101 (where special circumstances, other than financial hardship alone, make it desirable to waive).
7. For the respondent, Mr Robert Hamilton advised that he had become aware of the documents relating to the trust, referred to by Mr Somerset, but had not had the opportunity to study them in detail. Mr Hamilton submitted that the Tribunal should not review the original decisions in relation to the debts but should limit its scope to the matters determined by the SSAT. He submitted that the monies had been properly withheld from Mr Somerset for both the 2002/2003 and 2005/2006 financial years. Mr Hamilton conceded that, if exceptional and unforseen circumstances prevailed, the monies could be paid to Mr Somerset and not withheld from him. However, he submitted that those requirements were not met in Mr Somerset’s situation.
SCOPE OF REVIEW
8. The ANew Tax System (Family Assistance) Administration Act 1999 (the Administration. Act) makes provision for a person to seek review of a decision such as the debt decisions made in Mr Somerset’s case[5]. One avenue is to seek review by an authorised review officer. When that procedure is followed, further review is then available by the SSAT[6].
[5] See s 109A of the Administration Act.
[6] See s 111 of the Administration Act.
9. Alternatively, decisions may be reviewed internally by or on behalf of the original decision maker and, where the person is still not satisfied with the decision, the matter may then be dealt with by an authorised review officer[7]. Further review may then be sought by the SSAT[8].
[7] See s 109A of the Administration Act and s 6.2 of the Family Assistance Guide (9 October 2009).
[8] See s 111 of the Administration Act.
10. Where a decision has been reviewed by the SSAT, a person affected by the decision made by the SSAT may apply to the Tribunal for review of that decision[9].
[9] See s 142 of the Administration Act.
11. There is no record in FAO documents before the Tribunal of an application for review by Mr Somerset of the decision relating to the 2002/2003 debt. Neither is there any record of any such review having been undertaken.
12. There is a record of an application by Mr Somerset for reassessment of his decision relating to the 2003/2004 debt. This is in the form of a letter, dated 25 May 2007. There is also a record of the FAO’s response to this request in the form of a letter, dated 5 June 2007, written on behalf of the original decision maker. That letter is not written by an authorised review officer and, indeed, includes, in the final paragraph, an advice to Mr Somerset of what to do if he wanted the decision reviewed by an authorised review officer.
13. For the 2005/2006 debt, there is no record of an application for review by Mr Somerset. Nevertheless, there is a letter, dated 11 December 2007, which confirms the original decision and also provides an advice to Mr Somerset of what to do if he wanted the decision reviewed by an authorised review officer.
14. There is no record of any request by Mr Somerset to have any of the three debt decisions reviewed by an authorised review officer. Mr Somerset confirmed that no such requests were made. Certainly, there is no record of any such review by an authorised review officer. That being the case, a precondition to enable the SSAT to review the debt decisions has not been met. I am satisfied that the SSAT correctly determined that it was unable to deal with the decisions which raised the debts. As the matter of Mr Somerset’s debts was not dealt with by the SSAT, I am also satisfied that those matters are not able to be determined by the Tribunal[10]. The only issue before the Tribunal is whether the respondent properly withheld the monies owed to Mr Somerset for the 2007/2008 financial year (ie the shortfall in FTB and taxation refund) having regard, in particular, to his exceptional and unforseen circumstances and extreme hardship.
[10] See ss 142 and 181 of the Administration Act (note the exceptions to s 142 set out in s 144(1), (1A) of the Administration Act
HEARING
15. Following oral submissions in relation to the scope of the Tribunal’s review, Mr Somerset and Mr Hamilton requested that the matter proceed without a further hearing. Section 34J of the Administrative Appeals Tribunal Act 1975 makes provision for a hearing to be conducted in the absence of the parties. It reads:
34J If:
(a) it appears to the Tribunal that the issues for determination on the review of a decision can be adequately determined in the absence of the parties; and
(b) the parties consent to the review being determined without a hearing;
the Tribunal may review the decision by considering the documents or other material lodged with or provided to the Tribunal and without holding a hearing.
16. Both parties have consented to the matter being completed in their absence and I am satisfied that it is appropriate to proceed in that manner.
MONIES WITHHELD
17. Under s 82(1)(b) of the Administration Act, a debt of FTB and/or CCB is recoverable by the Commonwealth by setting off family assistance, which includes FTB and CCB[11], to which the person is entitled against the debt. It was on this basis that Mr Somerset’s FTB entitlement for the 2007/2008 financial year was set off against his 2002/2003 debt.
[11] See s 3 of the ANew Tax System (Family Assistance) Act 1999 (the FA Act).
18. Under s 82(1)(f) of the Administration Act, a debt of FTB and/or CCB is recoverable by the Commonwealth by the application of an income tax refund owed to the person. Under s 87(1) and (2) of the Administration Act, the Commissioner of Taxation may apply the whole or a part of the refund to the debt. This results in the reduction in the amount of the refund and the amount of the debt. This is what occurred in relation to Mr Somerset’s debts for the 2005/2006 financial year.
19. As noted above, Mr Somerset’s concern is there were circumstances relating to him which should operate to prevent those monies from being withheld.
20. For setting off an FTB against a debt, s 84A(2) of the Administration Act provides that the Secretary “may determine that the whole or a part of the entitlement is to be set off against the debt”. No guidance is provided in the Administration Act as to how that discretion is to be exercised. That is also the case with recovery by application of an income tax refund in that s 87(1) provides that the Commissioner of Taxation “may apply the whole or a part of the refund to the debt”. Mr Hamilton referred the Tribunal to an internal memorandum of the respondent which guides decision makers in the exercise of those discretions[12]. This referred to the entitlement of all persons to natural justice and, in that context, to the need to consider a person’s exceptional and unforseen circumstances and to consider whether real financial hardship would result from withholding monies.
[12] Ref 107.1160 – “Tax garnishee to recover debts” (taken into evidence as exhibit 4).
EVIDENCE
21. In past years, Mr Somerset and his wife have engaged in a range of business activities including the acquisition and sale of property and the breeding of beef cattle on their grazing property with two integrated butcher shops. Currently, their only property is a stone-fruit orchard in the Stanthorpe area which they own and operate with an associated coffee shop which operates on a seasonal basis. They purchased the orchard for $870,000, after selling their grazing property and their butchering businesses, and still have a mortgage for approximately $250,000. They lease a motor vehicle and a tractor for $1,000 and $515, respectively, per month. They have a few head of cattle and their joint savings are in the order of $5,000. The coffee shop realises a profit of approximately $5,000 to $10,000 per year.
22. The orchard was commercially viable in the years before they purchased it and this was mainly because of the involvement of the previous owners’ family with associated reduction in labour costs. Mr Somerset had to hire labour, including a full-time foreman, until December 2008. Mr Somerset and his wife carry out as much of the work as they can but require assistance when pruning trees and when harvesting fruit. Equipment maintenance costs have been high as have ongoing costs, such as for electricity for the operation of the cold room facilities for 24 hours per day. They have managed some of these debts by using their visa card on which they have a substantial debit.
23. The fruit crop on Mr Somerset’s orchard is harvested from September to December. In 2008, they suffered a loss of approximately $300,000 because of a crop failure due to a series of problems. They experienced severe hailstorms as well as fruit bat and parrot infestations. These dramatically affected crop levels. The orchard is currently experiencing a good season and Mr Somerset expects a profit of $250,000 to $300,000 this year, sufficient to fund the orchard for the 2010 season.
24. In the early part of 2009, Mr Somerset and his wife were counting on the receipt of their taxation refunds from the ATO to assist them in meeting their 2008 costs. Mrs Somerset received her refund in the amount of $14,096 and Mr Somerset expected a similar amount. Instead, after the FAO withheld part of his refund, he received only $2,929. This greatly affected them as it prevented them from paying debts which arose from the previous poor season. In order to manage financially, they sold some of their cattle and have relied upon fortnightly payments from the FAO.
CONSIDERATION
25. In 2008, Mr Somerset experienced difficulties with his orchard in the form of severe hailstorms as well as fruit bat and parrot infestations. These impacted heavily on the orchard’s yield and resulted in a substantial loss to him. It may be the case that these events were outside of Mr Somerset’s expectations and comprised forces of nature which were both exceptional and unforseen by him. However, his circumstances have improved significantly this year and have recovered to the extent that he is hopeful of returning a profit sufficient to take him into 2010. The monies withheld from Mr Somerset relate to debts owed by him to the Commonwealth. These have not been waived and are concerned with public monies to which he was not entitled. In the ordinary course, there is an expectation that they should be repaid[13]. In considering whether special circumstances exist to justify non-recovery of the amounts owed by Mr Somerset and whether financial hardship would arise if withholding was not applied, it is appropriate to consider his circumstances as at the date of the Tribunal’s decision[14]. Given Mr Somerset’s improved circumstances, I am satisfied that it was appropriate for the respondent to withhold the shortfall in FTB and taxation refund owed to him for the 2007/2008 financial year.
[13] See Secretary Department of Social Security v Hales (1998) 82 FCR 154 at 155.
[14] See Shi v Migration Agents Registration Authority (2008) 235 CLR 286 at 300-302, 314-316, 319 and 330. And see Haidar vSecretary Department of Social Security (1998) 157 ALR 359 at 367.
DECISION
26.The Tribunal affirms the decision under review.
I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member
Signed: .........................[Sgd]................................................
Research AssociateDate/s of Hearing 23 October 2009;
Hearing on the papers 16 November 2009
Date of Decision 25 November 2009
Applicant was self-represented
Solicitor for the Respondent Mr Robert Hamilton, departmental advocate
0
5
0