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

[2017] AATA 1087

Tseng; Secretary, Department of Social Services and (Social services second review) [2017] AATA 1087 (13 July 2017)

Division:General Division

File Number:2016/6668           

Re:Secretary, Department of Social Services  

APPLICANT

Tseng, Lien-ShuAnd  

RESPONDENT

DECISION

Tribunal:Dr Gordon Hughes, Member

Date:13 July 2017

Place:Melbourne

The Tribunal sets aside the decision under review and substitutes a decision that the Respondent is not entitled to top up payments for the 2013-2014 year as her partner failed to lodge his tax return for that year within the applicable time frame.

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

Member

FAMILY TAX BENEFIT – entitlement to top up payments – claimant's husband lodged his tax return out of time – whether special circumstances warrant an extension of time

Legislation

A New Tax System (Family Assistance) (Administration) Act 1999 sections 32C, 32D

Cases

Beadle and Director-General of Social Security (1984) 6 ALD 1
Bisceglie and Secretary, Department of Social Services [2016] AATA 294
Dean and Department of Education, Science and Training [2005] AATA 586
Hooker and Secretary, Department of Social Services [2015] AATA 732
Secretary, Department of Social Services and Other [2015] AATA 941

REASONS FOR DECISION

Background  

1. The Applicant is seeking a review of a decision by the Social Services and Child Support Division of the Tribunal to extend the time for lodgement by the Respondent of her husband's 2013-2014 tax return.  On the basis of the late lodgement of the return, the Respondent had lost her entitlement to full top up payments of the family tax benefit.  The Applicant disputed that there were special circumstances which warranted an extension.

   LEGISLATION

2. Section 32C of the A New Tax System (Family Assistance) (Administration) Act 1999 (the "Administration Act"), which applies to the Respondent, provides:

   Relevant reconciliation time--first individual must lodge tax return

   (1)This section applies to the first individual for a same-rate benefit period if:

   (a)the first individual is or was required to lodge an income tax return for the relevant income year; and

   (b)clause 38L of Schedule 1 to the Family Assistance Act did not apply to the first individual at any time during the same-rate benefit period.

   (2)Disregard paragraph (1)(b) if the first individual was a member of a couple at any time during the same-rate benefit period.

   (3)The relevant reconciliation time is the time when an assessment is made under the Income Tax Assessment Act 1936 of the first individual's taxable income for the relevant income year, so long as the first individual's income tax return for the relevant income year was lodged before the end of:

   (a)the first income year after the relevant income year; or

   (b)such further period (if any) as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the first individual from lodging the return before the end of that first income year.

   (4)The further period under paragraph (3)(b) must end no later than the end of the second income year after the relevant income year.

3. Section 32D of the Administration Act, which applies to the Respondent's husband, provides:

   Relevant reconciliation time--no separation of couple and partner must lodge tax return

   (1)This section applies to the first individual for a same-rate benefit period if:

   (a)the first individual was a member of a couple throughout that period; and

   (b)the other member of the couple (the partner) is or was required to lodge an income tax return for the relevant income year; and

   (c)the first individual continues to be a member of the couple until the end of:

   (i)     the first income year after the relevant 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 partner from lodging the return before the end of that first income year.

   (2)The relevant reconciliation time is the time when an assessment is made under the Income Tax Assessment Act 1936 of the partner's taxable income for the relevant income year, so long as the partner's income tax return for the relevant income year was lodged before the end of:

   (a)the first income year after the relevant income year; or

   (b)such further period (if any) as the Secretary allows under subparagraph (1)(c)(ii).

   (3)The further period under subparagraph (1)(c)(ii) must end no later than the end of the second income year after the relevant income year.

   Discussion

4. In the 2013/2014 income year, the Respondent was partnered to Mr Ivan Mac, had one dependent child and was in receipt of the family tax benefit.

5. On 24 March 2015 the Applicant advised the Respondent to lodge her tax return for the 2013-2014 year, and her partner's tax return, by 30 June 2015; this in order to receive her full family tax benefit entitlement.  The Respondent lodged her tax return on 14 July 2014, but Mr Mac did not lodge his return until 15 March 2016.

6. The Applicant then notified the Respondent that the full family tax benefit entitlement for the 2013/2014 income year was not payable because her partner had not lodged his tax return for the 2013/2014 income year by 30 June 2015.  The Respondent sought a review of that decision in the Social Services and Child Support Division of the Tribunal.

7. In November 2016 the Social Services and Child Support Division granted the Respondent an extension of time for lodging Mr Mac's income tax return to 15 March 2016, taking account of evidence from Mr Mac that 2014 had been a "very stressful year, running my stores and dealing with existing mental illness".  The Applicant now seeks a review of that decision.

8. The Applicant contended that Mr Mac did not satisfy the conditions set out in section 32D of the Administration Act.

9. The parties do not dispute that Mr Mac lodged his individual income tax return for 2013/2014 on 15 March 2016; which was after the end of the first income year and after the relevant reconciliation time referred to in section 32D.

10. The relevant reconciliation time could only be extended to 15 March 2016  if there were special circumstances which prevented Mr Mac from lodging the return before the end of the first income year under section 32D(2)(b). The Applicant contended that such special circumstances did not exist.

11. In Hooker and Secretary, Department of Social Services [2015] AATA 732, Senior Member Toohey referred to a two-part test for the establishment of special circumstances which prevented a person from making a claim on time; namely, that the circumstances that existed were special, and that those circumstances prevented the claimant from making his or her claim within time.

12. In Secretary, Department of Social Services and Other [2015] AATA 941, DP Humphries adopted the two-part test from Hooker, reiterating that 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 [her] claim within time.

13. In Beadle and Director-General of Social Security (1984) 6 ALD 1, the Tribunal emphasised that in order to satisfy the requirement for special circumstances, it was necessary to identify circumstances which were markedly different from the usual run of cases, being circumstances with a particular quality of unusualness  that permits them to be described as special.

14. Mr Mac asserted the existence of special circumstances on the basis that his mental illness, work commitments and the need to deal with a complex business structure, all combined to prevent him focussing on the need to meet the deadline for submission of his tax return.

15. Mr Mac told the Tribunal how he struggled to prioritise his affairs while his business grew in its formative stages.  His stresses were compounded by grief over his grandmother's death, together with what he described as his mental illness.  He traced his mental condition back to 2002 when his father died in a car accident.  He was required, as the eldest son, to care for his mother, who was then diagnosed with cancer in 2006 and who died in 2009.

16. Mr Mac emphasised that the fact that he continued to run his business was not inconsistent with mental illness.  He said he struggled from day to day, making mistakes and not running the business well.  He wanted to keep the business afloat so that he could sell it, and was working six or seven days a week, including out-of-hours.

17. The Respondent also gave evidence, confirming to the Tribunal that her husband had gone through a lot following the death of his parents.  He had trouble concentrating at home, was forgetful and did not sleep well.

18. A medical report from Dr Dang Phan was submitted to the Tribunal.  The report, dated 26 May 2016, stated, relevantly, that the Respondent had presented with depression, anxiety and stresses and that he had told Dr Phan that he could not complete his tax return on time.

19. The Applicant contended that Dr Phan's report was not evidence that the existence of any depression, anxiety and stresses prevented Mr Mac lodging his tax return by the due date.  It was not relevant that Mr Mac had simply asserted to his medical practitioner that he could not complete his tax return on time.  It was more relevant, in the Applicant's contention, that despite these issues, Mr Mac had continued to conduct his business until its sale in mid-2016.

20. In relation to the connection between mental illness and special circumstances in this context, the Applicant referred to the analysis of previous Tribunal decisions as set out in Dean and Department of Education, Science and Training [2005] AATA 586, which concluded that an assessment of special circumstances involves consideration of the impact of the medical condition on the person's capacity to make rational decisions in managing their day to day affairs.

21. The Applicant emphasised that despite Mr Mac's worsening depression from the middle of 2014, he had continued to operate his business in partnership with his business partner, Mr Thavin Dash, until mid-2016, with only intermittent absences due to mental ill-health.

22. On the question of whether Mr Mac's work commitments, complex business structure and attendant difficulty in compiling financial statements for taxation purposes constituted special circumstances, the Applicant referred the Tribunal to Bisceglie and Secretary, Department of Social Services [2016] AATA 294. In that case the Tribunal determined that the pressures of running a business, including lodging taxation papers, working long hours and coping with health issues were not circumstances which were so unusual or uncommon as to make them out of the ordinary or special.  Of course, each case must be assessed on its individual merits.

23. In the Tribunal's opinion, special circumstances did not exist, in the sense referred to in section 32D of the Act, which warrant an extension of time for the submission of a tax return. The Tribunal accepts that Mr Mac was subjected to a range of stresses, that he was preoccupied in running his business and that he was suffering a degree of undiagnosed anxiety or depression. These pressures, however, are not of themselves unusual; and they are not, in this Tribunal's opinion, sufficient to take Mr Mac out of the realm of the ordinary.

    DECISION

24. For the reasons stated above, the Tribunal sets aside the decision under review and substitutes a decision that the Respondent is not entitled to top up payments of the family tax benefit for the 2013-2014 year, as her partner failed to lodge his tax return for that year within the applicable time frame.

I certify that the preceding 24 (twenty‑four) paragraphs are a true copy of the reasons for the decision herein of Dr Gordon Hughes, Member

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

Associate

Dated: 13 July 2017

Date of hearing:	9 May 2017
Advocate for the Applicant:	Tim Noonan - FOI and Litigation Branch Department of Human Services
Advocate for the Respondent:	Mr Ivan Mac