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

Trimboli and Secretary, Department of Social Services (Social services second review) [2017] AATA 1331 (18 August 2017)
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2016/5174

General Division )
Re: Rosa Trimboli
Applicant

And: Secretary, Department of Social Services
Respondent
CORRIGENDUM
TRIBUNAL:  Ms Anna Burke, Member
DATE of CORRIGENDUM:   19 October 2018
PLACE:           Melbourne

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application.

The dates in the second bullet point on the cover page are changed from 1 July 2015 and 17 July 2015 to 1 July 2014 and 17 July 2014.

In paragraph 48, the following sentence is inserted between the second and last sentence: The equivalent of this period is to be applied to the 2013-14 year to allow this reduction to relate to the income year which is the subject of this review.

The dates in the second bullet point of paragraph 54 are changed from 1 July 2015 and 17 July 2015 to 1 July 2014 and 17 July 2014.

In the first bullet points on the cover page and paragraph 54, the word ‘year’ is inserted at the end of the sentence.

...........................[sgd]........................................
Member
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL              )
  )         No: 2016/5174
General Division  )
Re: Rosa Trimboli
Applicant

And: Secretary, Department of Social Services
Respondent
CORRIGENDUM
TRIBUNAL:  Ms Anna Burke, Member
DATE of CORRIGENDUM:   22 August 2017
PLACE:           Melbourne

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application as follows:

The reference to section 1237AAD of the Act on the first page and in paragraph [54] is to be altered to read section 101 of the Act.

...................................................................
Ms Anna Burke, Member
Division:GENERAL DIVISION
File Number: 2016/5174
Re:Ms Rosa Trimboli
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

Tribunal:Ms Anna Burke, Member
Date:18 August 2017
Place:Melbourne

The Tribunal sets aside the reviewable decision and in substitution determines that:
·the applicant has a legally recoverable debt arising from the overpayment of her family tax benefit of $13,676.55 for the 2013–14 income;
·in accordance with section 1237AAD of the Act, the right to collect part of the debt from 1 July 2015 until 17 July 2015 is waived; and
·the matter is remitted to the respondent to recalculate the applicant’s debt in accordance with this decision.

........................................................................
Ms Anna Burke, Member
Family tax benefit – whether applicant entitled to family tax benefit – late lodgement of tax return - is debt raised and recoverable – should debt be waived or written off, in part or full – whether severe financial hardship or special circumstances making desirable to waive debt applicable – reviewable decision set aside and substituted
Legislation
Administrative Appeals Tribunal Act 1975
A New Tax System (Family Assistance) Act 1991
A New Tax System (Family Assistance) (Administration) Act 1999
Cases
Re Callaghan and Secretary Department of Social Security [1996] 45 ALD 435
Re Anderson and Secretary, Department of Families and Community Services [2002] 69 ALD 494
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
Re Groth and Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541
Re Secretary, Department Social Security and Hollis [2015] AATA 941
REASONS FOR DECISION
Anna Burke, Member
18 August 2017
Introduction

Ms Trimboli is seeking a second tier review of the determination of Centrelink that found she has a recoverable family tax benefit (FTB) debt of $13,676.55 for the 2013–14 income year as she received a FTB payment to which she was not entitled as she did not fulfil section 14A of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Act).
The application was heard on 29 May 2017. Ms Trimboli was self-represented and appeared by telephone. Mr Tim Noonan, a lawyer in the Freedom of Information and Litigation Team of the Department of Human Services appeared for the respondent.
Background
On 18 March 2015 Ms Trimboli applied online for family tax benefit for the financial year 2013–2014. In the application form, she advised that her income was $45,000 and her partner’s was zero. She had the intention of lodging a tax return for this period.
Electronic records indicate that on 25 June 2015 Ms Trimboli had phoned Centrelink to advise that she and her partner were not required to lodge tax returns, as they had no taxable income for the 2013–14 financial year. Centrelink is the service provider for the Department of Human Services.
On 25 June 2015 Ms Trimboli received a notification from Centrelink stating, “Your entitlement for the financial year 2013–14 has been assessed using your annual family income and your family circumstances.” Ms Trimboli received $13,676.55 from Centrelink on 29 June 2015.
On 2 January 2016 Centrelink advised Ms Trimboli she had a debt to Centrelink as she had received more family tax benefit than she was entitled to. On 12 May 2016 on internal review, a departmental Authorised Review Officer (ARO) affirmed the earlier Centrelink decision.
On 22 August 2016 the Social Security and Child Support Division of the Tribunal (Tier 1) affirmed the decision, finding that Ms Trimboli’s claim for FTB under section 14A of the Act had not been validly made. Therefore, FTB could not be granted and subsequently, she has a debt.
Ms Trimboli requests a review of the Tier 1 decision by the General Division of the Tribunal (Tier 2). She strongly believes the information she provided had not been taken into account in the previous reviews.
At all relevant times, Ms Trimboli was partnered to her husband Mr Kopievsky and had two FTB eligible children. During the 2013–2014 financial period, Ms Trimboli and Mr Kopievsky were running a small business which was experiencing financial difficulties the business eventually failed leaving them in significant debt and the loss of their home.
IssueS
The Tribunal needs to consider the following relevant issues:
(a)whether Ms Trimboli had an entitlement to FTB for the 2013–2014 income year;
(b)if there was no entitlement, does Ms Trimboli have an FTB debt of $13,676.55; and
(c)if so, are there any grounds to write off or waive recovery of the debt, in whole or in part.
LEGISLATIVE FRAMEWORK
FTB is worked out as an annual entitlement, based on the combined adjusted income of the recipient and their partner. In the financial year in question, recipients could elect to receive FTB in fortnightly instalments based on their income assessments. Alternatively, they could elect to receive their full FTB entitlement after the end of the financial year.
Section 14A of the Act deals with a claim for FTB for a past period that is for one of the two income years prior to the year in which the claim is made. Ms Trimboli’s claim was for the 2013–2014 income year, which was the income year prior to the income year in which she lodged a claim and is therefore covered by section 14A.
Restriction on determining claim where income tax return not lodged
(1)If, in relation to a claim for payment of family tax benefit made by an individual:
(a)the claim is for payment of that benefit for a past period; and
(b)the past period falls in an income year (the past period income year ) that is one of the 2 income years before the one in which the claim is made; and
(c)one or more of subsections (2) to (3A) apply;
then the claim is taken never to have been made.
(2)This subsection applies if:
(a)the claimant is required to lodge an income tax return for the past period income year; and
(b)the claimant has not lodged the return before the end of:
(i)     the first income year after the past period income year; or
(ii)    such further period (if any) as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the claimant from lodging the return before the end of that first income year.
(3)This subsection applies if:
(a)at the time the claim is made, a person is the claimant's partner, and that person was the claimant's partner at any time during the past period; and
(b)that person is required to lodge an income tax return for the past period income year; and
(c)that person has not lodged the return before the end of:
(i)     the first income year after the past period income year; or
(ii)    such further period (if any) as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the person from lodging the income tax return before the end of that first income year.
(3A)This subsection applies if:
(a)the claimant, or any other individual whose adjusted taxable income is relevant in working out the claimant's entitlement to, or rate of, family tax benefit for the past period, is not required to lodge an income tax return for the past period income year; and
(b)the claimant does not notify the Secretary of the amount of the claimant's adjusted taxable income for the past period income year before the end of:
(i)     the first income year after the past period income year; or
(ii)    such further period (if any) as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the claimant from making that notification before the end of that first income year.
(4)The further period referred to in subparagraph (2)(b)(ii), (3)(c)(ii) or (3A)(b)(ii) must end no later than the end of the second income year after the past period income year.
Ms Trimboli and her partner lodged individual tax returns with the Australian Taxation Office (ATO) on 17 July 2015, which was after the required return date of 30 June 2015. Therefore, in accordance with subsection 1(c) of section 14A of the Act, Ms Trimboli’s FTB claim will be taken to have never been made, unless special circumstances prevented Ms Trimboli and her partner from lodging their tax returns for the 2013–2014 income year by 30 June 2015.
Ms Trimboli asserts that her tax return was lodged late because her accountant became terminally ill and subsequently passed away.
Section 71 of the Act relevantly sets out how a FTB debt may arise, whether by payment of an amount which a person was not entitled to or by an overpayment. It provides:
Debts arising in respect of family assistance other than child care benefit, child care rebate and family tax benefit advance
No entitlement to amount
(1)If:
(a)an amount has been paid to a person by way of family tax benefit, stillborn baby payment or single income family supplement (the assistance) in respect of a period or event; and
(b)the person was not entitled to the assistance in respect of that period or event;
the amount so paid is a debt due to the Commonwealth by the person.
Overpayment
(2)If:
(a)an amount (the received amount ) has been paid to a person by way of assistance; and
(b)the received amount is greater than the amount (the correct amount ) of assistance that should have been paid to the person under the family assistance law;
the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.
Accordingly, The Tribunal finds that Ms Trimboli received $13,676.55 as an overpayment as per section 71(2) and therefore has a debt owing to the Commonwealth.
Section 95 of the Act confers a discretion on the Secretary to write off a debt:
(1)The Secretary may, on behalf of the Commonwealth, decide to write off a debt for a stated period or otherwise, but only if subsection (2), (4A) or (4B) applies.
Secretary may write off debt if debt irrecoverable or debt will not be repaid etc.
(2)The Secretary may decide to write off a debt under subsection (1) 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.
…
Section 97 provides that the Secretary must waive the right to collect a debt if it is attributable solely to an administrative error:
(1)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
(b)the debt is raised after the end of:
(i) the debtor’s next income year after the one in which the eligibility period or event occurs; or
(ii) the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;
whichever ends last; and
(c)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.
(4)For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt
Section 101 confers a discretion on the Secretary to waive all or part of the debt 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 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.
Consideration
Writing off the debt
The Tribunal, standing in the shoes of the Secretary, has the discretion to write off the debt or waive the right to collect the debt, if it was due solely to administrative error.
On the evidence before the Tribunal Ms Trimboli does not meet the criteria as established in section 95 of the Act and as such, the Tribunal is unable to write off the debt.
Waiver the debt on the basis of administrative error
Centrelink could not action payment of Ms Trimboli’s FTB until it had received notification from the ATO that her 2013–2014 tax return had been lodged. Centrelink actioned the payment as a consequence of Ms Trimboli’s phone call of 25 June 2015, in which it believe she advised no tax returns were required to be lodged. Indeed, had the recorded phone call of 25 June 2015 not taken place, Ms Trimboli would have received nil FTB for the 2013–2014 year.
At the hearing, Ms Trimboli was adamant that when she called Centrelink by phone on 25 June 2015 she had not advised that she and her partner were not required to lodge a tax return for the 2013–2014 period as they had earned below the tax free threshold. Ms Trimboli stated, “Why would I ring the Department and asked for an update, then say I don’t need to lodge return, when I’d already been to the accountant and lodged a return. We believe there was a hold-up with the ATO.” Ms Trimboli firmly believes that Centrelink was mistaken in its recording of the details of the phone call of 25 June 2015.
Ms Trimboli did concede at the hearing that her original online application of 18 March 2015 contained incorrect information. She stated that she thought she made a mistake in the calculation of her and her partner’s income for that year. When asked by the respondent, “What did you mean when you said you didn’t know where the $45,000 came from?” she replied, “Our incomes were combined. I think the department thought that was my partner’s income alone. It was an estimate of what the business may have paid to us.”
Ms Trimboli presented at the hearing as an honest and forthright individual who was not seeking to exploit the system for individual gain. Ms Trimboli asked at the Tribunal, “If I’m found to be late to lodge tax returns unreasonably, can’t I pay a late fine rather than paying back the whole amount? It seems really harsh when I was actually entitled to it, at the time and not now. I feel strongly that I have done nothing to rob the system.”
The Tribunal accepts Ms Trimboli’s statements regarding the phone call of 25 June 2015 and finds it is reasonable that she did not intend to inform Centrelink that she was exempt from lodging a tax return, given that she had already made arrangements with her accountant to lodge a return. The Tribunal finds that there was an administrative error on behalf of Centrelink which contributed to the overpayment of Ms Trimboli’s FTB resulting in her Centrelink debt, as that payment would not have occurred without the apparent miscommunication. However the Tribunal is not satisfied that this error was the sole cause of the overpayment and the provisions of section 97 are therefore not applicable.
Waive all or part of the debt in special circumstances
Alternatively, the Tribunal, standing in the shoes of the Secretary, has the discretion to waiver all or part of Ms Trimboli’s debt. For the discretion to be exercised, all three conditions in contained in subsections (a), (b), and (c) of section 101 must be satisfied.
Knowingly
The term ‘knowingly’ has not been defined in the Act, though it has been considered extensively by the Tribunal in similar circumstances.
In Re Callaghan and Secretary Department of Social Security [1996] 45 ALD 435, Deputy President Forgie said:
”There is nothing in section 1237AAD which suggests that the word “knowingly” should be given any meaning other than that a person has actual knowledge rather than constructive knowledge, that he or she is making a false statement or representation that he or she is failing or admitting to comply with a provision of the Act. The actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act of omission.”
The Tribunal found that Ms Trimboli’s debt did not arise because she knowingly made false statements or declarations. The Tribunal found that Ms Trimboli had not deliberately acted dishonestly with any intention to mislead Centrelink.
In Re Anderson and Secretary, Department of Families and Community Services [2002] 69 ALD 494, the Tribunal stated:
“[…] it is open to the tribunal to infer that the applicant has actual knowledge of his obligations under the act where there are opportunities for that knowledge to be gained when there are no obstacles to him acquiring knowledge. In this case, the applicant has had the opportunity to gain an understanding of his obligations under the Act to the provision of advice letters to him from the respondent. The tribunal is not aware of any obstacles that would prevent Mr Anderson from understanding those letters and gaining that knowledge.”

Centrelink had advised Ms Trimboli by letter on 29 March 2015:
“We are unable to complete the assessment of your Family Tax Benefit for the 2013-14 financial year until your income details are confirmed. You need to lodge your 2013-14 tax return/s with the Australian taxation office before 30 June 2015. The Australian Taxation office will then confirm your income with us.
Supplying details to an accountant or tax agent does not mean that the tax returns have been lodged with the Australian Taxation Office.”
The Tribunal was unable to satisfy itself that Ms Trimboli had received appropriate advice from Centrelink explaining her obligations to lodge by 30 June 2015, as the letter sent by Centrelink went to Ms Trimboli’s former address. However Ms Trimboli was aware her tax return needed to be lodged by 30 June 2015 and believes she received this information via email.
Even if Ms Trimboli can be found to have had knowledge or the opportunity to gain knowledge of her obligations under the Act, there is no evidence to suggest that she knowingly failed to comply with the legislation. As noted the Tribunal accepted her assertion that she had not advised Centrelink that she and her partner were not required to submit tax returns for the 2013–14 financial year. It also accepts that she attempted to file her tax return before 30 June 2015 by lodging the relevant documents with her accountant, some three months before the deadline for lodgement..
The Tribunal found Ms Trimboli had not knowingly or deliberately misled Centrelink and therefore the debt has not arisen solely or partly from her making a false statement or knowingly failing to comply with the legislation. As such, subsection (a) of section 101 of the Act is satisfied
Special circumstances
The expression ’special circumstances’ has not been defined in the Act. However the meaning of “special circumstances” has been considered extensively by the Federal Court and the Tribunal.
In Ryde v Sec Department of Family and Community Services [2005] FCA 886, Branson J said:
”[…] the evident purpose of s 1237AAD is to enable a flexible response to the wide range of circumstances which could give rise to hardship or unfairness, the statutory requirement for special circumstances discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness to which French J referred must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case.”
In Groth v Secretary Department of Social Security [1995] FCA 1708, Kiefel J said:
“[…] for present purposes it is sufficient to observe that it requires something to distinguish Mr Groth’s case from others, to take it out of the usual ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow if one to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.”
In summary, it has been held that for circumstances to constitute “special circumstances” they must be circumstances which are “unusual, uncommon or exceptional”, “markedly different from the usual run of cases”, “special”, or “out of the ordinary”, and they include “events which would render the strict application of the rule in question unfair or inappropriate”.
Ms Trimboli confirmed at the hearing that she and her partner had been using Mr Nick Kavadias as their tax accountant for many years. Business records show that Ms Trimboli and her partner had an appointment with Mr Kavadias in March 2015 for their 2014 tax affairs. Ms Trimboli explained she and her partner attended the accountant on the day he completed their tax returns, which they signed at the conclusion of the appointment and left for him to lodge.
Ms Trimboli made several phone calls to her accountant to ascertain if the completed returns had been lodged with the ATO. She was constantly advised by the receptionists that information had been passed on to the accountant but she did not speak to her accountant directly until November 2015 when she and her partner attended to complete her 2014–15 return. Ms Trimboli’s tax return 2014–15 was lodged on time.
Ms Trimboli subsequently learned that Mr Kavadias had passed away from terminal cancer in February 2016. It was not until January 2016 that Ms Trimboli was made aware that her tax return had not been lodged in time for her FTB claim.
Ms Trimboli provided to the Tribunal a letter from Mr Kavadias’ widow that states:
“Nick started showing signs of not being himself, that is unexplainable tiredness and discomfort, approximately April 2015. Approximately June/July 2015 it became evident that he was not himself and feeling unwell, he was exceptionally tired and not able to keep the business hours he had in the past. As his condition worsened, in approximately September he was diagnosed with terminal cancer where he received immediate treatment but sadly passed away February 2016.”
Ms Trimboli also provided a letter from Susan Nguyen, the tax agent who has subsequently taken over Mr Kavadias’ business, which states:
“Mr Kavadias, who was diagnosed with cancer and passed away in February 2016, I believe the reason for late lodgements was due to Mr Kavadias’s terminally illness. Please accept this letter in good faith as this was outside the control of the taxpayer and her previous tax agent.”
In respect of special circumstances in the case of a late claim for FTB, the Tribunal has found on numerous occasions that there is a more stringent two-part test. As the lodgements of tax returns are the responsibility of the individual, including those who lodge via a tax agent, failure by an accountant or tax agent to lodge a tax return within the lodgement period will not ordinarily constitute special circumstances.
Deputy President Humphreys in Re Secretary, Department of Social Services and Hollis [2015] AATA 941 stated:
”"[I]n order for the time for making a claim to be extended, the secretary (and in turn the Tribunal) must be satisfied of two things: first, that circumstances existed that were special and, secondly, that those special circumstances prevented the claimant from making a claim within time.”
Whilst the Tribunal accepts that Ms Trimboli was responsible at all times for the lodgement of her tax return, it did find that Ms Trimboli had made every effort to ensure her return was lodged on time and the terminal illness of her accountant contributed to the late lodgement of her and her partners return.
The Tribunal is not satisfied that this amounts to special circumstances which would allow the entire debt to be waived. However it considers that Centrelink’s misconstruing of Ms Trimboli’s phone call of 25 June constitutes a special circumstance which makes it desirable to waive part of the debt from the date it was paid, being 1 July 2015, to the date Ms Trimboli lodged her tax return for the 2013-14 year on 17 July 2015. As noted, the Tribunal finds that Ms Trimboli did not intend to advise Centrelink that she was exempt from lodging a tax return and therefore made no steps to claim the payment until she lodged the return on that date.
Waiving the debt more appropriate than writing off the debt
The Tribunal accepts it is not appropriate to write off the debt and therefore Ms Trimboli satisfies this section of the Act.
Conclusion
It cannot be said that the debt was attributable solely to administrative error. Consequently section 97 of the Act does not apply in this case.
Nevertheless, the Tribunal takes the view that there was a contributing error by Centrelink in recording the phone conversation of 25 June 2015 which resulted in the payment of FBT and justifies waiving part of the debt.
Further, the Tribunal accepts Ms Trimboli made every effort to lodge her tax return on time and she firmly believed that her accountant had lodged the return by 30 June 2015, as he had always fulfilled her tax requirements on time over many years. Her belief over the period was that there was a hold-up with the ATO and therefore an inability for Centrelink to reconcile her claim against a tax return.
The Tribunal standing in the shoes of the secretary has the ability to waive all or part of the debt Ms Trimboli owes to Centrelink. While special circumstances have not been established to the extent that the debt should be waived entirely, there were issues contributing to the late lodgement of Ms Trimboli’s tax return and contributing administrative error resulting in the initial payment of the FBT. Therefore, the Tribunal determines that part of Ms Trimboli’s debt should be waived in this circumstance.
Decision
The Tribunal sets aside the reviewable decision and in substitution determines that:
·the applicant has a legally recoverable debt arising from the overpayment of her family tax benefit of $13,676.55 for the 2013–14 income;
·in accordance with section 1237AAD of the act, the right to collect part of the debt from 1 July 2015 until 17 July 2015 is waived; and
·the matter is remitted to the respondent to recalculate the applicant’s debt in accordance with this decision.

I certify that the preceding 54 (fifty-four) paragraphs are a true copy of the reasons for the decision herein of

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

Associate

Dated: 18 August 2017

Date of hearing:	29 May 2017
Date final submissions received:	1 June 2017
Applicant:	Self-represented
Advocate for the Respondent:	Mr T Noonan, Department of Human Services, FOI & Litigation Branch

[2017] AATA 1331

18 August 2017

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Administrative Law

Statutory Interpretation

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