Totten and Secretary, Department of Social Services (Social services second review)

[2017] AATA 1514

Totten and Secretary, Department of Social Services (Social services second review) [2017] AATA 1514 (20 September 2017)

Division:GENERAL DIVISION

File Numbers:         2017/2136

2017/2138

2017/2305

Re:Anthony Totten

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Ms N Isenberg, Senior Member

Date:20 September 2017

Place:Sydney

Application 2017/2136

The decision under review made on 16 March 2017 to cancel the Applicant’s Family Tax Benefit entitlement is affirmed.

Application 2017/2138

The decision under review made on 16 March 2017 to raise an overpayment of the Family Tax Benefit is set aside and in substitution it is decided that the Applicant’s debt of an overpayment of Family Tax Benefit in the sum of $27,750.76 is waived with the exception of $1933.60 already paid by the Applicant.

Application 2017/2305

The decision under review made on 16 March 2017 to raise an overpayment of the Schoolkids bonus in the sum of $2,090.00 is affirmed.

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

Ms N Isenberg, Senior Member

CATCHWORDS

SOCIAL SECURITY – cancellation of Family Tax Benefit – Applicant does not press issue of cancellation – decision affirmed

SOCIAL SECURITY – overpayment of Family Tax Benefit – whether the Applicant was overpaid Family Tax Benefit entitlements – debt can be written off or waived – Family Tax Benefit child receiving carer payment during the debt period – whether the debt was solely attributable to an administrative error – whether there are special circumstances – decision set aside and substituted

SOCIAL SECURITY – overpayment of Schoolkids Bonus – whether Applicant was overpaid the Schoolkids bonus – Applicant does not press issue of overpayment of Schoolkids Bonus – decision affirmed

LEGISLATION

A New Tax System (Family Assistance) Act 1999 (Cth) ss 3, 22A

A New Tax System (Family Assistance) (Administration) Act 1999 (Cth), ss 95, 97, 101

Social Security Act 1991 (Cth), s 23

CASES

Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114

Dranichnikov v Centrelink [2003] FCAFC 133
Secretary, Department of Social Security v Hales [1998] FCA 219
Secretary, Department of Social Security and VYS (1995) 40 ALD 745

Skinner and Secretary, Department of Social Services [2015] AATA 569              

SECONDARY MATERIALS

Explanatory Memorandum, A New Tax System (Family Assistance) Bill 1999 (Cth)

REASONS FOR DECISION

Ms N Isenberg, Senior Member

20 September 2017

Background

1. The Applicant, Anthony Totten, was paid Family Tax Benefit (FTB) and Schoolkids Bonus for some years up until 23 May 2016, for his son, Jesse.  On 15 April 2016, when Jesse was aged 16, this Tribunal (differently constituted) decided that Jesse qualified for carer payment with respect to his father, from 1 November 2013.  On 5 September 2016, the Respondent (Centrelink) decided that, as a result of the Tribunal’s decision, the Applicant was not entitled to FTB or the Schoolkids Bonus in respect of Jesse for the same period and had therefore been overpaid $29,840.06.  That decision was affirmed on internal review and on review by the Social Security and Child Support Division of this Tribunal (SSCSD) on 16 March 2017.

2. The issues for the Tribunal to determine are as follows 

   ·whether Mr Totten qualified for FTB and the Schoolkids Bonus between 1 November 2013 and 26 May 2016 (Application 2017/2136);

   ·whether the Applicant was overpaid FTB from 1 November 2013 to 23 May 2016 (Application 2017/2138);

   ·whether the Applicant was overpaid the Schoolkids Bonus from 1 November 2013 to 23 May 2016 (Application 2017/2305); and

   ·whether there is any basis to write off or waive any part of the debt resulting from an overpayment.

3. The Applicant did not press the issue of the cancellation of the FTB. Additionally, the Applicant did not dispute that had been paid the FTB, but he contended that he should not have to repay it.

   Relevant legislation

4. The legislation relevant to this matter is contained in:

   ·A New Tax System (Family Assistance) Act 1999 (the Family Assistance Act); and

   ·A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).

   Was the Applicant overpaid FTB?

5. The qualification criteria for FTB (and Schoolkids Bonus) are set out in the Family Assistance Act. It is a necessary condition that a person has at least one FTB Child.  During the relevant period Jesse was the Applicant’s only FTB Child. 

6. Section 22A of the Family Assistance Act relevantly provides that a person cannot be an FTB child of another individual if that person is receiving a social security pension or a social security benefit. Carer payment is a social security pension: s 3 of the Family Assistance Act and s 23(1) Social Security Act 1991.  As a result, when Jesse was granted carer payment from 1 November 2013, he ceased to be an FTB Child pursuant to s 22A of the Family Assistance Act. The Applicant was therefore not qualified to receive payments of FTB (and Schoolkids Bonus) with respect to Jesse after that date.

7. The debt calculations include Schoolkids Bonus overpayment of $2090, being $820 for 2013/14, $842 for 2014/15 and $428 paid on 1 January 2016. 

8. The FTB component totals $27,750.76, being $6,463.82 from 1 November 2013 to 30 June 2014, $9,943.70 from 1 July 2014 to 30 June 2015 and $11,343.24 from 1 July 2015 to 23 May 2016.

9. The total overpayment is $29,840.06.  I was informed that the debt currently stands at $27,906.46.

   The Applicant’s submissions

10. The Applicant conceded that he should have to pay back the Schoolkids Bonus, but it was unclear to me why he made this point of differentiation with FTB.  He said that there had been a lot of effort put into gaining approval for Jesse to participate in distance learning while caring for his father.  Proceedings in the Children’s Court were required and social workers were involved in managing Jesse’s welfare while undertaking his caring responsibilities.  Once approved, the schools had been very supportive and had provided a large amount of equipment and had teachers had spent a lot of time with Jesse.  He was very appreciative of the teachers and their support of Jesse. 

11. As to the FTB component of the debt the Applicant said it was unfair that it should have to be repaid.  He and Jesse have had to rely on the money while Jesse was fighting to get the carer payment and they needed the money to live on, as he only had his disability support pension.  The Applicant had received no financial support for Jesse from his ex-wife for some years.

12. The Applicant said that at the beginning of the relevant period he, Jesse and his brother were living in the old family home, which was jointly owned by the Applicant and his brother following their mother’s death.  There was an offer to buy the house, but the purchasers were apparently unscrupulous and protracted litigation ensued.  In the end result, the Applicant received $334,262 from the sale of the home but was obliged, he said, to pay $110,000 in legal expenses.  As to purchases he had made with the proceeds of sale, he said he bought a suit because he had been upset and embarrassed at having no suit to wear to his mother’s funeral.  He was able to pay for Jesse’s glasses and orthodontic work.  He did not spend money on his own dental needs, and produced a quote for about $20,000 for necessary dental work.  He bought a small cheap car, the running costs of which Jesse helps to finance. 

13. At the conclusion of the litigation he was required to urgently vacate the house, but found the rental market to be prohibitive. He did not enquire with Centrelink about rental assistance because he thought it might confuse the discussions about Jesse’s entitlement to carer payment.  He rented until late 2016 when he decided that, from the proceeds of sale of the house, he would purchase a boat, on which he and Jesse could live.  With the various expenses associated with the purchase, it cost about $200,000.  The mooring fees are $1260 per month.  He rarely runs the boat as it is too expensive to do so, even though its 4-cylinder motor does not use much fuel.  He said Jesse is paying half to three quarters of the mooring fees. 

14. Furniture from his mother’s home is in storage at a cost of about $380 per month.  He said that Jesse is paying for the storage.

15. Other than a share of the mooring fees, the storage costs and the running of the Applicant’s car, Jesse does not make any financial contribution to the household.  The Applicant said he had no expectation that Jesse would pay anything at all until he turned 18.

16. The Applicant said he had never had a credit card and has never been in debt.  

17. When Jesse received his carer’s payment back-pay (about $56,000) he put most of it in the bank.  He paid $7500 for a large 10 year old car which makes transporting the Applicant easier because of his mobility problems.  Jesse pays for his own personal and study expenses.  The Applicant said he does not begrudge Jesse the money because he was ‘denied a childhood’ by having to care for his father. 

18. The Applicant has a number of serious health issues, which especially affect his mobility.  He requires surgery on his left and right knees, his right foot and his lumbar spine, but none has yet been scheduled.  He provided evidence of his various medications, including 4 x 40 mg of Oxycontin 4 times per day, which is a high dose.  He said he has been on that medication for 18 years and that, over time, it ‘loses its effectiveness’.  He also suffers from anxiety with panic attacks and major depression, for which he is also medicated.  His medication attracts a variety of undesirable side-effects.  He exhausts the ‘safety net’ by about April each year.  In all, it would appear he is highly medicated.

    Consideration

19. Subsection 95(1) of the Administration Act provides that debts that have arisen under that Act may only be written off in accordance with s 95(2) of the Administration Act. Centrelink submitted, and I agree, that in the present case it does not appear to be appropriate to write off the debt.

    Is there any basis to waive the debt?

20. Division 4 of Part 4 of the Administration Act deals with the non-recovery of debts raised under that Act. In the ordinary course, all debts raised under the Act must be recovered.

    Was the debt solely attributable to Centrelink’s administrative error?

21. The Applicant contended that he had been paid FTB during the relevant period because he was entitled to that pension. The Respondent did not dispute that, at that time, this was the case. However, it contended that due to the operation of s 22A of the Family Assistance Act, once Jesse became entitled to carer payment, a social security pension, the Applicant was not entitled to receive FTB in respect of the same period.

22. The Applicant said that, through all the time of their extensive dealings with Centrelink in order to secure carer payment to Jesse, it had never been suggested there may be an impact on the Applicant’s entitlement to FTB or that he might have to pay back what he had already been paid in respect of Jesse during the relevant period.  

23. Section 97 of the Administration Act provides that the Secretary must waive a debt that arises solely as a result of administrative made by the Commonwealth, if the person would suffer financial hardship if the debt were not waived. It provides relevantly as follows:

24. The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.

    (2)  The Secretary must waive the administrative error proportion of a debt if:

    (a)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and

    (b)the person would suffer severe financial hardship if it were not waived.

    (3)  The Secretary must waive the administrative error proportion of a debt if:

    (a)the payment or payments were made in respect of the debtor’s eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and

    …

    (c)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.

    [original emphasis]

25. The Applicant submitted that the failure to grant Jesse carer payment until it was determined otherwise by this Tribunal constituted an administrative error and that, consequently, that the Applicant was paid FTB was a result of this error. It was contended on Centrelink’s behalf that there is no administrative error because the Applicant was paid FTB as, at the relevant time, he met the qualification criteria for the payment, as set out in the Family Assistance Act, and was paid accordingly. There could be no error in paying someone in accordance with their legislated entitlement.

26. The term ‘administrative error’ is not defined in the Administration Act. The term is also used, but not defined, in the Social Security Act 1991.  I was referred to Dranichnikov v Centrelink [2003] FCAFC 133 (Dranichnikov) where the Full Court observed in relation to the meaning of “administrative error” at [62]):

    It is neither possible nor appropriate to attempt a meaning of the words "administrative error" which would accurately cover every case for much will turn upon the circumstances. Essentially, however, the concept is one where the error or mistake arises as a result of the procedure that has been adopted. An obvious example would be payment of a benefit where the decimal point was wrongly located. An error made by Centrelink or the Australian Taxation Office acting on its behalf in its administration of the law will generally be an administrative error. On the other hand, a decision made, for example, on a question of legal entitlement to a benefit while no doubt made in the course of administration of the law would not be an administrative error.

    [emphasis added]

27. Following the implementation of the Tribunal’s decision of 15 April 2016 that Jesse was eligible for carer payment from 1 November 2013, Centrelink only then decided that the Applicant was not entitled to FTB from the date Jesse became entitled to carer payment.  There had been no error in payment to the Applicant until Jesse’s entitlement to carer payment was determined: per Dranichnikov. The payment then was not an ‘administrative error' for the purpose of s 97 of the Administration Act.

28. It was discussed at the hearing however, that, although the Tribunal’s decision was dated 15 April 2016, Centrelink continued to pay the Applicant FTB until 23 May 2016, about 6 weeks later.  It was contended on behalf of the Respondent that, following the Tribunal’s decision it was open to Centrelink to continue making the payments to the Applicant, as it had been doing, while considering its position in respect of the Tribunal’s decision.  I accept that there may be some practical difficulties in immediately implementing a decision of a Tribunal, and further, in managing the expectations of Centrelink beneficiaries who are affected as a consequence of such a decision, during the period in which Centrelink is entitled to consider its position vis-à-vis a possible appeal.  I do not consider that the continuation of payment in those circumstances, at least during the 28 day appeal period, to amount to an administrative error.  It is a matter I have taken into account in discussing whether there are special circumstances in this case.  

    Are there special circumstances why the debt should be waived?

29. Section 101 of the Administration Act provides a discretion to waive a debt due to special circumstances, subject to some conditions. It provides as follows:

    The Secretary [the Tribunal on review] may waive the right to recover all or part of a debt if the Secretary [the Tribunal on review] 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 the family assistance law; 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.

30. There was no contention that the debt in this case arose from the Applicant knowingly making a false statement or representation, or knowingly failing to comply with a provision of the family assistance law. The only issue then is whether there are ‘special circumstances’ (other than financial hardship alone) that make it desirable to waive all or part of the debt.

31. In Secretary, Department of Social Security v Hales [1998] FCA 219 (Hales) French J (as he then was) observed as follows:

    From time to time in the administration of social security benefits overpayments occur. Sometimes these are the result of innocent non-compliance with the requirements of the law which can be affected by the stress associated with the circumstances that led to the receipt of benefits in the first place. The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality.

32. Further, in Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 (Davy) Deputy President Forgie noted AT [80]: 

    The “special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances ... that make it desirable to waive".  That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system.

33. The Applicant submitted that the way the debt came about was very unusual and there was no way he could not have avoided incurring the debt; the debt arose as a result of Jesse’s successful application for carer payment. Centrelink conceded that the Applicant did not specifically do anything to cause the overpayment, and noted that the Applicant had supported Jesse’s application. Centrelink contended that an absence of fault does not displace the general expectation identified in Hales, that those who are found to have received more than their entitlement to social security benefits re to repay that money in a manner appropriate to their circumstances.

34. It was submitted on Centrelink’s behalf that Jesse had been paid arrears of carer payment to support himself during the debt period. Centrelink noted that payments under the Family Assistance Act are made to provide assistance for families, rather than individuals, and are paid to assist persons with the costs involved in raising children for whom they are legally responsible. It relied on the finding by AAT1 that it would be inconsistent with the purpose of social security payments that payments be made for the same purpose to two people. I think this reasoning is flawed. Jesse, as the Applicant’s child, had to be supported by the Applicant during the relevant period, and the Applicant provided for his son, utilising FTB, to which he was entitled. It was not of matter a choice. The reasoning tends to suggest, naively in my view, that this created some obligation in Jesse to refund to his father what had been expended on him (ie the FTB), and that the Applicant then could refund Centrelink.

1. A factor to be taken into account in this case is the public interest.  This factor was discussed by Deputy President Deutsch in Skinner and Secretary, Department of Social Services [2015] AATA 569 at [48] – [49]:

   48It is important to recognise the need to ensure the integrity of the social security system and the public interest. This means that those recipients who have received monies to which they are not entitled, are generally expected to repay those monies unless the repayment is in the specific circumstances unjust, unreasonable or inappropriate.

   49No evidence has been proffered by the Applicant to suggest that there are sound reasons for the amount owing not to be repaid.

2. I agree that there is a community expectation that those who receive Centrelink benefits to which they are not entitled should repay those amounts. 

3. I accept that the legislative intent of s 22A of the Family Assistance Act is that in cases where a child is in receipt of a social security payment, then the adult who is legally responsible for that child is not entitled to further payments of FTB. As was set out in the Explanatory Memorandum to the Family Assistance Act, when introduced:

   An individual cannot be an FTB child of an adult if the individual or someone on behalf of the individual is receiving a social security pension or benefit...This provision prevents individuals from “double dipping", that is, attracting certain social security payments ... and also being an FTB Child so as to enable an adult to be eligible for FTB in respect of the individual.

   A social security pension, as defined in the Social Security Act, includes disability support pension, wife pension, carer payment, pension PP (single) and bereavement allowance.

   A person is “receiving” a social security pension or benefit from the earliest day on which the payment is payable to the person even if the first instalment of the payment is not paid until a later date. This rule prevents an individual who receives arrears of pension or benefit for a past period from being an FTB Child of an adult for the period covered by the arrears payment.

   [emphasis added]

4. I agree that the legislation intended that a person not be entitled to FTB (and related payments) in respect of a child who is already supported by Commonwealth payments. 

5. Centrelink did not dispute that the Applicant is under financial pressure as he is unable to work but noted that this is unfortunately the case for many social security beneficiaries – particularly for those receiving disability support pension; it is not unusual, uncommon or exceptional for a recipient of DSP to have health problems: Secretary, Department of Social Security and VYS (1995) 40 ALD 745.

6. It was submitted on Centrelink’s behalf that, the Applicant may be able to alleviate his financial hardship by asking for some further contribution to their living expenses.  Still, this is entirely a decision for him.  The Applicant’s evidence was of a loving and caring son who has taken, and continues to take his caring responsibilities very seriously.  The Applicant spoke of his concern as to how he would cope should Jesse decide to leave him.

7. Following the Tribunal’s decision of 15 April 2016 Jesse received a lump sum payment of arrears that is significantly greater than the debt raised against the Applicant.  Whilst this payment was not given to the Applicant and the debt was not raised against Jesse, Jesse remains the Applicant’s full-time carer.  Centrelink contended that, as such, the back pay represents money that is available to the household and may be used for any purpose deemed appropriate. This submission, I think, is flawed, on three bases.  Firstly, there is no requirement that a carer be a family member or that they reside with the person being cared for.  Consequently, there is no notion of ‘pooling’ inherent in the carer/cared for scenario, which the Respondent suggests. Secondly, Jesse is now an adult. He may spend his money as he wishes; there is no obligation to contribute to his father’s household, or to repay his father’s debt, for that matter.  Finally, payment to Jesse was not conditional – it was not offset, so far as he is concerned, against his father’s FTB debt. 

8. Centrelink contended that, ultimately, the Applicant has had the benefit of FTB payments to which, if Jesse’s carer payment had been granted at the date of claim, he would never have received.  It was Centrelink’s decision to refuse, and then when challenged, dispute, Jesse’s entitlement. 

9. It is inescapable that the community expectation is that there is no ‘double-dipping’. The phrase, in the present case is distasteful, because it is unnecessarily emotive and tends to suggest some element of fault. This matter is very unfortunate. Centrelink paid the Applicant FTB in accordance with its obligations.  Jesse was, at the same time entitled to carer payment.  No one could be described as being in any way at fault, although, had Centrelink accepted that Jesse was entitled to carer payment when he first claimed it, there would have been no or minimal overpayment of FTB to the Applicant. That the resolution of Jesse’s entitlement, including the period after the Tribunal’s decision, took so long was a major factor in the accumulation of the Applicant’s debt. 

10. As noted by Deputy President Forgie in Davy, waiver of the FTB payments would mean that the Applicant has had the benefit of additional money to which others in similar situations have not. Centrelink contended that, similar to Davy, there is no injustice in requiring the Applicant to repay that money in a manner that is reasonable and affordable to the Applicant. Centrelink noted that its policy to recover debts from social security beneficiaries by withholdings that are affordable for the debtor.  The Applicant claimed that he was having in excess of $100 per fortnight deducted from his DSP, which I understand is about $800 per fortnight.  If correct, this seems very high. 

11. Centrelink also noted that the Applicant is now being asked to repay the FTB, by deductions from his social security payment, without interest. This seems somewhat disingenuous to me, given that there was no evidence that Jesse might have been paid interest on his delayed carer payments.

    Conclusion

12. Overall, I find there was sufficient evidence before me to persuade me that the Applicant’s circumstances are “special” for the purposes of waiver.  However, in the exercise of my discretion, I do not propose to waive the debt in its entirety.

    Decision

13. The Tribunal decides as follows:

    Application 2017/2136

    The decision under review made on 16 March 2017 to cancel the Applicant’s Family Tax Benefit entitlement is affirmed.

    Application 2017/2138

    The decision under review made on 16 March 2017 to raise an overpayment of the Family Tax Benefit is set aside and in substitution it is decided that the Applicant’s debt of an overpayment of Family Tax Benefit in the sum of $27,750.76 is waived with the exception of $1933.60 already paid by the Applicant.

    Application 2017/2305

    The decision under review made on 16 March 2017 to raise an overpayment of the Schoolkids Bonus in the sum of $2,090.00 is affirmed.

I certify that the preceding 47 (forty-seven) paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member

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

Associate

Dated: 20 September 2017

Date(s) of hearing:	4 September 2017
Date final submissions received:	4 September 2017
Advocate for the Applicant:	Mr G J Totten
Solicitors for the Respondent:	Mr S Davidson, Department of Human Services