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

Tydd and Secretary, Department of Social Services (Social services second review) [2019] AATA 89 (5 February 2019)
Division:GENERAL DIVISION
File Number(s): 2017/1538 & 2017/7684
Re:Kasey TYDD
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:D K Grigg
Date:5 February 2019
Place:Brisbane

The Tribunal affirms the decision under review.
............................[Sgd]..........................................
Member D K Grigg
CATCHWORDS
SOCIAL SECURITY – Newstart allowance – overpayment – where applicant did not advise Centrelink of income – income reassessment - where no administrative error – where no special circumstances – decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1936 (Cth)
Social Security Act 1991 (Cth)
Social Security (Administration) Act 1999 (Cth)
CASES
Beadle and Director-General of Social Security (1984) 6 ALD 1; [1984] AATA 146
Charles & Charles [2007] FamCA 276
Re Clifford and June Callaghan and Secretary, Department of Social Security [1996] AATA 413
Haldane-Stevenson v Director-General of Social Security (1985) 7 ALD 467
Re Heather Margaret Heidemann and Secretary to the Department of Social Security [1985] AATA 82
Prantage v Prantage (2013) 49 Fam LR 197; [2013] FamCAFC 105
Secretary, Department of Social Security v Brian McLaughlin & Anor [1997] FCA 1456
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
SECONDARY MATERIALS
Guides to Social Policy Law
REASONS FOR DECISION
Member D K Grigg
5 February 2019

Ms Kasey Tydd has been a recipient of the Newstart Allowance (“NSA”) since 2013.[1] This matter concerns whether Ms Tydd’s income for the financial year ended 30 June 2014 has been correctly assessed and whether Ms Tydd was overpaid NSA.
[1] Exhibit 3, Secretary’s Statement of Facts and Contentions dated 19 June 2018, Annexure 1, pages 1 – 9.
BACKGROUND AND CLAIMS HISTORY
Ms Tydd was granted NSA on 12 August 2013 with effect from 3 July 2013.[2] In her NSA claim form Ms Tydd advised the Department of Human Services (“Centrelink”) that:
(a)she was self-employed;
(b)owned a company called “Tone Zone Power Plate Studio Pty Ltd” (“the Company”); and
(c)the Company derived an income of $31,136 per annum.
[2] Exhibit 3, Secretary’s Statement of Facts and Contentions dated 19 June 2018, Annexure 1, pages 10-11; Exhibit
1, T Documents, T 21, page 240, Centrelink record.
One of Ms Tydd’s obligations as a NSA recipient was to report her income to Centrelink every fortnight.[3] Centrelink sent numerous notices to Ms Tydd throughout the period she was receiving NSA, advising her of the amount of NSA she was being paid and the fortnightly income Centrelink was using to calculate her NSA payment.[4] Between 12 May 2014 and 26 August 2014 Centrelink advised Ms Tydd that her NSA was being calculated on the basis that her total fortnightly income was $6.90.[5] The notices also advised
[3]     Exhibit 3, Secretary’s Statement of Facts and Contentions dated 19 June 2018, Annexure 1, pages 12 – 18.
[4]     Exhibit 1, T Documents, T 17, pages 325 – 382, Centrelink letters issued to Ms Tydd between 12 May 2014 and 5
January 2016.
[5]     Exhibit 1, T Documents, T 17, pages 328 – 338, Centrelink letter to Ms Tydd between 12 May 2014 and 26 August
2014.
[6]     Exhibit 1, T Documents, T 17, pages 343, 358, 360, 362, 364, 366, 368, Centrelink letters to Ms Tydd between 18
November 2014 and 27 February 2015.
Ms Tydd that she had an obligation to inform Centrelink within 14 days if her circumstances changed, for example if she started paid work or any form of employment. Between 18 November 2014 and 27 February 2015 Ms Tydd was advised that her NSA was being calculated on the basis that her total fortnightly income was $43.35.[6]
On 13 April 2015 and 26 May 2015 Ms Tydd’s NSA was suspended because she failed to comply with an obligation to attend an appointment with her employment services provider.[7]
[7] Exhibit 1, T Documents, T 17, pages 370 - 372, Letters from Centrelink to Ms Tydd dated 13 April 2015 and 26 May
2015.
On 24 July 2015 Ms Tydd was asked to provide Centrelink with information about the Company including providing the Company’s tax returns and financial statements for the 2014 and 2015 financial year.[8]
[8] Exhibit 1, T Documents, T 17, pages 374 - 376, Letter from Centrelink to Ms Tydd dated 24 July 2015.
On 14 August 2015 Ms Tydd notified Centrelink that she was self-employed as a fitness trainer but that her business ran at a loss.[9]
[9] Exhibit 2, T Documents, T 24, page 267, Centrelink record.
On 22 September 2015 a Centrelink officer recorded that they were assessing
[10] Exhibit 2, T Documents, T 24, page 271, Centrelink record.
Ms Tydd’s carer claim and that if she was earning an income from the Company her payments may need to be suspended.[10]
Centrelink wrote to Ms Tydd on 24 November 2015 and again requested information regarding the Company and what income she had earned.[11]
[11] Exhibit 2, T Documents, T 25, page 369, Letter from Centrelink to Ms Tydd dated 24 November 2015.
On 10 December 2015 Ms Tydd provided Centrelink with a copy of a tax return for the Company for the financial year ended 30 June 2014. Ms Tydd was a Director and a 50% shareholder of the Company. Ms Tydd informed Centrelink that her accountant advised her that she was not required to have a personal income tax return because the business had operated at a loss.[12]
[12] Exhibit 1, T Documents, T 5, page 101, Letter from Ms Tydd to Centrelink dated 10 December 2015.
The Company tax return for the financial year ended 30 June 2014 indicated that it made a loss of $29,323.[13]
[13] Exhibit 1, T Documents, T 5, pages 102 - 108, Company Tax Return.
On 5 January 2016 Ms Tydd was asked to provide Centrelink with information about the Company including providing the Company’s tax returns and financial statements for the 2014 and 2015 financial year.[14]
[14] Exhibit 1, T Documents, T 17, pages 379 - 382, Letter from Centrelink dated 6 January 2016.
On 19 January 2016 Ms Tydd provided Centrelink with a copy of her individual tax return and a profit & loss statement and balance sheet of the Company for the 2014 financial year. These documents were prepared by Ms Tydd’s accountants on 14 July 2014. According to these financial records, during the 2014 financial year, Ms Tydd:[15]
(a)was paid $35,000 to act as the Company’s fitness centre manager;
(b)received $13,060 from Centrelink in allowances; and
(c)had a taxable income of $48,060.
[15] Exhibit 1, T Documents, T 5, pages 119 – 126, Ms Tydd's individual tax return 2014.
On 22 July 2016 a Complex Assessment Officer (“CAO”) from Centrelink determined that the $35,000 Ms Tydd received from the Company, as indicated in the financial records and tax returns:
(a)should have been considered in determining Ms Tydd’s rate of NSA; and
(b)was to be assessed as a lump sum from 14 July 2014.[16] 14 July 2014 was the date the Company reports were prepared.
[16] Exhibit 2, T Documents, T 23, page 254, Centrelink record.
Having received the tax returns and financial records of the Company and Ms Tydd, Centrelink performed a recalculation of Ms Tydd’s NSA entitlements, actual and received.[17] A decision was made on 22 July 2016 to reduce Ms Tydd’s NSA.[18]
[17] Exhibit 1, T Documents, T 8-T 9, pages 168 - 176, Debt information and calculation documents dated 17 July 2017.
[18] Exhibit 2, T Documents, T 14, page 125, ARO decision dated 16 September 2016.
Ms Tydd requested a review of the decision to reduce her NSA on 26 July 2016 and according to a Centrelink record advised the following:[19]
Customer further advised that she did not receive this $35,000 wage from the company in 2014 as advised in the company & individual tax returns & has been trying to stay afloat, with company running at a loss, signing a Part 9 Government Debt Agreement & only receiving occasionally $300/wk.
[19] Exhibit 2, T Documents, T 24, page 290, Centrelink record.
On 27 July 2016 Ms Tydd provided Centrelink with:
(a)a copy of a tax return for the Company for the financial year ended 30 June 2015 which indicated that the Company:[20]
[20]    Exhibit 1, T Documents, T 7, pages 131 – 143, Company Tax Return 2015.
(i)made a total profit of $24,876;
(ii)had salary and wage expenses totalling $37,000;
(b)financial statements of the company for the year ended 30 June 2015 show that:
(iii)Ms Tydd, was paid a gross salary of $14,500;[21]
(iv)a loan of $8,701.40 had been made to the directors;[22]
(c)a copy of her individual tax return for the 2015 financial year which indicated that for the 2015 financial year Ms Tydd:[23]
(v)was paid $14,500 to act as the Company’s fitness centre manager;
(vi)received $13,394 from Centrelink in allowances; and
(vii)had a taxable income of $27,894.
[21]    Exhibit 1, T Documents, T 7, page 152, Company balance sheet 2015; pages 157 – 160, company PAYG payment
summary statement 2015
[22]    Exhibit 1, T Documents, T 7, page 152, Company profit and loss statement 2015.
[23]    Exhibit 1, T Documents, T 7, pages 162 – 167, Ms Tydd’s individual tax return 2015.
There is no record of this information being provided to Centrelink prior to 2016.
On 27 July 2016 a CAO made a further determination that Ms Tydd’s income was to be assessed based on the Company records for 2014/15 because she was a joint controller of the Company.[24]
[24] Exhibit 2, T Documents, T 23, page 256, CAO record dated 27 July 2016.
On 16 September 2016 an Authorised Review Officer (“ARO”) determined that the decision to reduce Ms Tydd’s NSA from 21 July 2014 as a result of income earned from the Company was correct.[25]
[25] Exhibit 2, T Documents, T 14, pages 125 – 134, Decision of Authorised Review Officer and notes dated 1 June
2017.
On 23 September 2016 Ms Tydd requested a review of Centrelink’s 22 July 2016 decision to reduce her NSA by the Social Services and Child Support Division (“SSCSD”).[26]
[26] Exhibit 2, T Documents, T 16, page 153, Confirmation of application for review.
On 28 September 2016 Centrelink determined that Ms Tydd had been overpaid NSA totalling $30,099.78 (“NSA Debt”) for the period between 21 July 2014 and 12 July 2016.[27] On 28 September 2016 Centrelink sent a notice to Ms Tydd advising her of the NSA Debt and informing her that it was payable by 27 October 2016.[28]
[27] Exhibit 1, T Documents, T 10, page 177, Letter to Ms Tydd dated 28 September 2016.
[28] Exhibit 1, T Documents, T 10, page 177, Centrelink notice dated 28 September 2016.
On 31 October 2016 Ms Tydd advised that:[29]
(a)she shares ownership of the Company with a business partner and everything earned by the Company was equally shared;
(b)she and the Company had entered into a Part IX Debt Agreement in 2014;[30]
(c)she was advised by her accountant that, given her income was so low, she was not required to complete an individual tax return;
(d)she had serious health issues at that time;
(e)due to her financial circumstances she was evicted from her home and became homeless; and
(f)she currently lives with people privately.
[29] Exhibit 2, T Documents, T 18, pages 156-157, Letter from Ms Tydd dated 31 October 2016.
[30] A type of debt agreement entered between a debtor and creditors pursuant to Part IX of the Bankruptcy Act
1966 (Cth).
On 2 March 2017 the SSCSD rejected Ms Tydd’s claim and affirmed the ARO’s decision to reduce her NSA.[31]
[31] Exhibit 2, T Documents, T 2, pages 4 – 8, SSCSD’s Decision and Reasons for Decision dated 2 March 2017.
On 17 March 2017 Ms Tydd lodged an application for review by this Tribunal of the SSCSD’s decision to affirm the decision to reduce her NSA.[32]
[32] Exhibit 2, T Documents, T 1, pages 1 – 3, Application for Review dated 17 March 2017.
The Authorised Review Officer (“ARO”) determined that the relevant NSA period was between 21 July 2014 and 12 July 2015 and therefore reduced the debt owing to $13,661.21[33]
[33] Exhibit 1, T Documents, T 11, pages 179 – 185, Decision of ARO and notes dated 1 June 2017.
Ms Tydd then sought a further review of the decision to raise the NSA Debt on
[34] Exhibit 1, T Documents, T 12, pages 186 – 187, Letter from AAT to Centrelink re appeal dated 7 July 2016.
7 July 2017.[34]
On 17 October 2017 Ms Tydd completed a Statement of Financial Circumstances which provided that she and the Company had entered into a Part 9 debt agreement in 2014. The remainder of the form was left blank.[35]
[35] Exhibit 1, T Documents, T 13, pages 188 – 192, Statement of financial circumstances completed 17 October 2017.
On 20 November 2017 the SSCSD rejected Ms Tydd’s claim and affirmed the ARO’s decision to raise the NSA Debt.[36]
[36] Exhibit 1, T Documents, T 2, pages 3 – 9, SSCSD’s Decision and Reasons for Decision dated 20 November 2017.
On 22 December 2017 Ms Tydd lodged an application for review of the SSCSD’s decision to raise the NSA Debt by this Tribunal.[37]
[37] Exhibit 1, T Documents, T 1, pages 1 – 2, Application for Review dated 22 December 2017.
ISSUES FOR DETERMINATION
The issues for determination are whether:
(a)Ms Tydd has been overpaid her entitlement to NSA; and, if yes
(b)the NSA Debt is recoverable; and
(c)the NSA Debt should be written off pursuant to section 1236 of the Social Security Act 1991 (Cth) (“the Act”); or
(d)the NSA Debts should be waived due to administrative error pursuant to section 1237A of the Act; or
(e)“special circumstances” exist such that the NSA Debt should be waived pursuant to section 1237AAD of the Act.
RELEVANT LEGISLATION
If a person is not entitled to the social security benefit they have obtained, the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.[38]
[38] Section 1223(1) of the Act.
The rate of NSA payable to a person is calculated using a benefit rate calculator at the end of section 1068 of the Act.[39] Module G of section 1068 of the Act provides a method statement for working out the effect of the person’s income on their maximum pay rate (“Income Reduction Amount”) and section 1068 – A1 of the Act provides a method statement for working out a person’s maximum payment rate and provides for the maximum payment rate to be reduced by the Income Reduction Amount.
[39] Section 643 of the Act.
Section 100(1) of the Social Security (Administration) Act 1999 (Cth) (“Administration Act”) provides:
Automatic rate reduction--recipient not complying with subsection 68(2) notice
(1) Subject to subsection (2), if:
(a)    a person who is receiving a social security payment is given a notice under subsection 68(2); and
(b)    the notice requires the person to inform the Department of the occurrence of an event or change of circumstances within a specified period (the notification period); and
(c)    the event or change of circumstances occurs; and
(d)    the person does not inform the Department of the occurrence of the event or change of circumstances within the notification period in accordance with the notice; and
(e)    because of the occurrence of the event or change of circumstances, the rate of the social security payment is to be reduced;
the social security payment becomes payable to the person at the reduced rate on the day on which the event or change of circumstances occurs.
HAS MS TYDD BEEN OVERPAID NSA?
Whether Ms Tydd has been overpaid NSA depends upon if the $35,000 wages recorded in the Company’s financial records, and Ms Tydd’s tax return should have been assessed as income and considered in calculating Ms Tydd’s rate of NSA.
The concept of income is treated differently under the Act than it is under the Income Tax Assessment Act 1936 (Cth): Haldane-Stevenson v Director-General of Social Security(1985) 7 ALD 467; Secretary, Department of Social Security v Brian McLaughlin & Anor [1997] FCA 1456 (per French J, as he then was).
Income is defined in section 8(1) of the Act to mean:
(a)an income amount earned, derived or received by the person for the person's own use or benefit; or
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance;
[emphasis added]
The meaning of “earned, derived or received” is defined in section 8(2) of the Act as a reference to:
(a)an income amount earned, derived or received by any means; and
(b)an income amount earned, derived or received from any source (whether within or outside Australia).
In Re Heather Margaret Heidemann and Secretary to the Department of Social Security [1985] AATA 82, the Tribunal discussed the meaning of “earning, derived or received” and noted that:
12. The meaning of "earned, derived or received" has been considered by this Tribunal on several occasions in relation to the identical definition of income (so far as relevant) in s.18 of the Act (now in s.6 of the Act, as amended last year) - see e.g. Re Smith and Director-General of Social Services (1982) 4 ALN No. 135; Re McBow and Director-General of Social Security (1984) 6 ALN N83 and Re Siebel and Director-General of Social Security (1983) 5 ALN No. 138. The gist of these decisions is that moneys may be "derived" before they are received, so long as a person has a present entitlement to them, and that income may be "earned or derived" without the actual receipt of it. As quoted in Re McBow, an instance is where work is performed for reward but payment has not actually been made. It was pointed out, however, in that case that "the worker has an immediately enforceable claim for it".
[emphasis added]
The evidence of Ms Tydd is that she never received the income/salary referred to in the Company’s financial documents during the financial year ended 30 June 2014 and that therefore it should not be considered.
Ms Tydd has consistently indicated to Centrelink and to this Tribunal that she never received the money declared to have been paid to her in the Company’s financial records and indeed in her own personal income tax returns.[40] The Tribunal is not able to make that decision based on the lack of records. The Tribunal also notes that Ms Tydd told the ARO in August 2016 that:[41]
(a)she received “much less” than the $35,000 yet she does not indicate exactly how much she in fact received; and
(b)the $35,000 figure in the Company records was simply an estimate because they cannot prepare a budget without a wage estimate.
[40] For example, see Exhibit 2, T documents, T 24, pages 289 – 290, Centrelink records.
[41] Exhibit 2, T Documents, T 14, page 130, ARO notes.
The financial statements were not forward projections. These were relevant documents for the preparing of tax returns to declare the actual state of events to the Australian Tax Office (“ATO”). The accountant would have been aware of that and the Tribunal does not believe that Ms Tydd was not aware of that. Ms Tydd also indicated that sometimes there is money they can take to live off and sometimes not. Again, no details were provided of exactly how much money Ms Tydd took out of the company.[42]
[42] Exhibit 2, T documents, T 14, page 130, ARO notes.
Ms Tydd told the Tribunal that:
·initially she was operating her business under her own name rather than as a company, and that each year she would declare a part payment.
·the 14 July 2014 tax return indicates that in the 2014 financial year the company made a taxable loss of $29,323 and the profit and loss statement indicates the company made a loss of $34,589.71[43] and that she was not paid because the Company did not have any money to pay her.
·the financial statements indicating that she was to be paid a salary of $35,000 was incorrect information.
·Ms Tydd says that in previous financial years she only declared or had a taxable income of approximately $14,000-$15,000 and does not understand why Centrelink cannot take that into account when determining whether the $35,000 was accurate.
·because there was depreciation on some fitness machines the Company had, that this had to be put down as earnings.
·there is a reference in the balance sheet of 30 June 2014[44] which shows that the Company made loans to directors totalling $27,902.63 and that this may have been treated as earnings of Ms Tydd.
[43] Exhibit 2, T documents, T 9, page 53, profit and loss of the company dated 30 June 2014.
[44] Exhibit 2, T documents, T 9, page 54, balance sheet of the company as at 30 June 2014.

Ms Tydd said the Company did not loan the Directors individually but the fitness machines were purchased in their personal names because the Company could not get credit. In the absence of any competent evidence from an accountant the Tribunal is unable to consider the submission. The Tribunal also notes that the same balance sheet also indicates that the Company owns assets totalling $22,483 which, presumably also includes the machines. The Tribunal is at a loss to understand why the accountant would have treated the debt owed by the Company on the machines as income treatable to
Ms Tydd and her co-director.
There is just not enough evidence to make the findings that Ms Tydd contends. The financial records clearly indicate that Ms Tydd earned $35,000 in wages. There is no indication whatsoever that the earnings had any correlation or connection with directors’ loans or debt agreements. The personal income tax returns reflect the information contained within the Company’s financial statements. There is nothing within the Company’s records indicating that Ms Tydd’s earnings were not “earnings”. Nor is there any independent explanation why this amount was recorded as income by Ms Tydd in her personal tax return if it was not taxable income.
After the hearing Ms Tydd provided a copy of a secured creditor contact sheet regarding the pieces of machine equipment which she says she entered into a debt on behalf of the Company. Even if Ms Tydd owes money on piece of equipment this does not take away from what amount of income the Company has declared it paid her or was due to pay her in the period in question.
The Company may have made the loss because it did pay Ms Tydd her wages. There is no evidence corroborating Ms Tydd’s submission that she did not receive wages from the Company. It is not Centrelink’s role to enquire as to whether in one year she had a better year in terms of what income she was able generate than any other. It is perfectly reasonable in the circumstances for Centrelink, and indeed the Tribunal, to attach weight to the official tax records and statements declared and provided to the ATO about the salary paid to Ms Tydd by the Company. Ms Tydd was unable to explain the depreciation argument and appeared to be merely guessing and searching for reasons why the Company records indicated she had received $35,000. The Tribunal is confused as to why depreciation payments or loan amounts would have been taken as earnings. There is no information from the accountants about why this would have been accounted for in this way.
Ms Tydd confirmed that the financial records and tax returns of the company and herself were prepared by a registered tax agent. When the Tribunal asked Ms Tydd where the accountants obtained the information to prepare the accounts, Ms Tydd said “I’m not sure”, although she acknowledged that she was a Director of the Company at the time. She then acknowledged that she would have instructed the accountant about the financial position of the Company.
The Tribunal is not satisfied that the accountant created fictitious or inaccurate expenses. The accountant relied on the instructions provided by Ms Tydd and/or her co-director as to the financial circumstances of the Company. The Company records provide an acknowledgment that the information was provided by the directors. The accountant had not undertaken an audit of any verification of those instructions. If, as Ms Tydd asserts, those financial records and tax returns are in error, one would have expected that
Ms Tydd would have engaged an alternative accountant or personally corrected the error with the ATO. Ms Tydd did not do so. Ms Tydd executed the tax returns for both herself and the Company and, pursuant to those returns, declared to the ATO that the information provided to her registered tax agent for the preparation of her tax return was true and correct. It is an unacceptable excuse that she did not understand why the accountant prepared the reports the way he did. By signing the document, she has taken responsibility for its contents. Making false and misleading statements to the ATO can result in significant penalties.
Ms Tydd was not able to adequately explain why the records contained the figures and information they did. This leaves the Tribunal in a situation where they are entitled to take the Company records and personal tax return information at face value.
Ms Tydd said her accountant made the decisions. If Ms Tydd was unsure of what she was signing she should have made enquiries of her accountant, and if there was any error, they could have been corrected prior to lodgement with the ATO. The Company’s financial statements provide that they are a summary of the Company’s financial position as at
[45] Exhibit 2, T documents, T 9, page 57, balance sheet of the company as at 30 June 2014.
30 June 2014 and that the Director is solely responsible for the information contained within those financial records. The accountant also recorded that it had not audited the Company’s accounts.[45]
The Secretary informed the Tribunal that the ordinary approach when dealing with lump sum payments is to project them forward because none of the lump sum amount was received in the prior financial period.[46]
[46] Exhibit 3, Secretary Statement of facts and contentions, dated 19 June 2018 paragraph 44.
The Secretary determined that, presuming Ms Tydd had not received that income, it was appropriate that the $35,000 recorded as wages for the year ended 30 June 2014 be projected forward commencing 14 July 2014 (the date that the Company’s financial records were prepared by the Company’s accountant) for 52 weeks ending 12 July 2015.
Pursuant to section 1073 of the Act where a person is receiving amounts that are not income the form of periodic payments the person is taken to receive 1/52 of that amount as ordinary income during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount. Pursuant to section 1073A of the Act where employment income has been earned, derived or received, or is taken to have been earned, derived or received, by a person who is receiving the Social Security pension that income is taken to have been earned, derived or received over such period not exceeding 52 weeks, as the Secretary determines.
This decision by the Secretary to apportion the income in the year commencing
[47] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, at 645.
14 July 2014 is consistent with the Guides to Social Policy Law (“the Guide”) which provides in paragraph 1.1.L.140 that “where lump sums are remunerative they are to be apportioned as income for up to 52 weeks from the date they are entitled to be received”. The Guide is used by Centrelink in interpreting and applying the provisions of the Act. The Tribunal is not bound to apply the Guide, but it may, and it should, apply it in exercising its discretion unless it is unlawful or “tends to produce an unjust decision”.[47]
The Secretary, accepting what Ms Tydd said regarding whether she had in fact received the salary amount declared in the Company’s financial records, determined to deem that income to be received in the 12-month period commencing 14 July 2014 pursuant to sections 1073 and 1073A of the Act.
Conclusion
According to the financial records of the Company, Ms Tydd would have been presently entitled to that income on the date those financial records were prepared.
The Tribunal cannot find that Ms Tydd was either not entitled, or did not receive the income declared to the ATO, because:
(a)no bank statements/records of either Ms Tydd or the Company were provided.
Ms Tydd has had ample opportunity to provide that kind of documentation; and
(b)no statement or evidence was provided from an accountant as to why an amount was declared as having been paid to Ms Tydd as an expense when in fact it was not.
The Tribunal considers that the financial records/tax returns prepared by the accountants during the relevant time period are the best evidence of what Ms Tydd’s financial circumstances were at that time. The PAYG summaries are also reflective of the information contained within the financial statements and the personal income tax returns.
As a result, the Tribunal has determined that given the lack of any other evidence to corroborate Ms Tydd’s account, she can be taken to have received, and may in fact have received, the $35,000 salary. The Tribunal agrees with the original decision of the Secretary to deem that income as having been received in the 12-month period commencing 14 July 2014 and 12 July 2015.
If it was accepted that Ms Tydd did not receive the income, this does not alter the fact that it is taken to be income and was therefore relevant to Centrelink’s determination of the rate of NSA payable to Ms Tydd during the relevant period, whether as a consequence any debt or overpayment has arisen.
There is no dispute Ms Tydd received the letters from Centrelink regarding her reporting requirements and obligations, and as a result, subsection 100(1)(a) of the Administration Act is satisfied. Ms Tydd did not dispute that she was fully aware of her reporting obligations to Centrelink.
The income declared to the ATO to have been received by Ms Tydd should have been reported to Centrelink. Subsections 100(1)(b)-(d) of the Administration Act are therefore satisfied. Because of the income earned by Ms Tydd the rate of social security should have been reduced and therefore subsection 100(1)(e) of the Administration Act is also satisfied.
Pursuant to subsection 100(1) of the Administration Act, Ms Tydd’s NSA can be retrospectively reduced for the period commencing 14 July 2014. Subsection 100(1)(e) of the Administration Act is satisfied.
The NSA Debt has been raised because Ms Tydd was being paid NSA based on a certain level of income and not the income earned during the period. As a result, Ms Tydd has been overpaid.
The Tribunal finds that Ms Tydd owes the NSA Debt to the Commonwealth.
IS THE NSA DEBT RECOVERABLE?
Even if a debt is owed, the Secretary may write off, or waive, a debt in certain circumstances set out in sections 1236, 1237A and 1237AAD of the Act.
Should the NSA Debt and Recovery Fee be Written Off? (section 1236(1A) of the Act)
Section 1236 provides relevantly:
Secretary may write off debt
(1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
(1A)The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c)...; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
Is the debt irrecoverable at law? (section 1236(1A)(a) of the Act)
Sections 1236(1B) and 1236(1C) of the Act sets out when a debt is taken to be irrecoverable at law:
(1B)For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(b)there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c)the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d)the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.
(1C)For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a) deductions from the debtor's social security payment; or
(b) deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999 ; or
(c) setting off under section 84A of that Act;
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
[emphasis added]
None of the circumstances in section 1236(1B) of the Act exist in this case and the NSA Debt is not irrecoverable at law.
Does Ms Tydd have capacity to repay the debt? (section 1236(1A)(b) of the Act)
The Secretary submits that there is no evidence to suggest that Ms Tydd has no capacity to repay the debt.[48] Ms Tydd is currently being paid Austudy of approximately $685.10 per fortnight[49] and is currently repaying a separate Family Tax Benefit (“FTB”) debt[50] by way of fortnightly instalments of $85.54.[51]
[48]    Exhibit 3, Secretary’s Statement of Facts and Contentions, dated 19 June 2018, paragraph 61.
[49]    Exhibit 3, Secretary’s Statement of Facts and Contentions, dated 19 June 2018, Payment records at Annexure 1, page 50.
[50]    The AAT1 noted this FTB debt in its decision dated 20 November 2017, at paragraph 32 (TT2, ff9).
[51]    Exhibit 3, Secretary’s Statement of Facts and Contentions, dated 19 June 2018, Repayment history screen at Annexure 1, page 62.
Other Tribunal decisions have determined that severe financial hardship needs to involve severe or extreme financial suffering and that a person’s entire financial position would need to be materially less than the current rate of their pension.[52]
[52] Re Lumsden and Secretary, Department of Social Security [1986] AATA 228; Stubbs and Secretary, Department
There is no evidence that Ms Tydd does not have the capacity to pay and therefore the NSA Debt should not be written off pursuant to section 1236(1A) of the Act.
Is it cost-effective for the Commonwealth to recover the debt? (s 1236(1A)(d))
There is no indication from the Secretary that it is not cost-effective for it to recover the debt.
Conclusion
There is no basis for the NSA Debt to be written off under section 1236 of the Act.
Did Ms Tydd receive the overpayment in Good Faith and was the Debt, or a proportion of the Debt, attributable solely to an Administrative Error? (section 1237A of the Act)
The Secretary must waive the right to recover 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.[53]
[53] Section 1237A of the Act.
No Administrative Error
If administrative error was the sole cause for the debt arising, the Secretary must waive the right to recover the debt. The debt “must be "attributable solely" to administrative error. It is not enough that, in the absence of administrative error, the debt would not have arisen. Administrative error must be the sole cause, not merely one of multiple causes.[54]
[54] Secretary, Department of Family & Community Services v Sekhon (2003) 73 ALD 41; [2003] FCA 76, per Wilcox J (at [41]); and on appeal to the Full Federal Court in Sekhon v Secretary, Department of Family and Community Services (2003) 76 ALD 105; [2003] FCAFC 190, at [23].
A recipient of a social security benefit is under an obligation to notify Centrelink of any changes in circumstances that might affect the payment of the social security payment within 14 days after the day on which the event or change occurs.[55]
[55] Section 66A(2) of the Administration Act.
The Secretary may also give a person, to whom a social security payment is being paid, a notice requiring the person to inform Centrelink if a specified event or change of circumstances occurs.[56]
[56] Section 68(2) of the Administration Act.
As referred to earlier, Centrelink sent numerous letters to Ms Tydd setting out her obligations to notify Centrelink if there was any relevant change in her circumstances.
Even if Ms Tydd was not aware of her obligations to notify Centrelink of what was contained in her financial records and tax returns, ignorance of the legal requirements is not a special circumstance. “Centrelink is not required to advise claimants about their legal rights to any particular social security payment or the rate of payment”.[57]
[57] See Murphy and Secretary, Department of Families, Housing, Community Services and
The NSA Debt arose due to a failure by Ms Tydd to comply with the relevant notification requirements. As a result, the NSA Debt owed by Ms Tydd was not ‘attributable solely to an administrative error made by the Commonwealth’ for the purposes of section 1237A(1) of the Act.[58]
[58] See Wecker v Secretary, Department of Education Science and Training[2008] FCAFC 108, at [102].
Should the NSA Debt and Recovery Fee be waived under section 1237AAD of the Act?
Further, the Secretary may exercise its discretion to waive the right to recover all or part of the debt pursuant to section 1237AAD which provides:
1237AAD Waiver 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 this Act, the Administration Act or the 1947 Act; 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.
There are a few elements to be satisfied under section 1237AAD of the Act before a debt may be waived. First, the debt must not have arisen from the debtor; that is the debtor must not have knowingly made a false statement or a false representation or knowingly failed or omitted to comply with a provision of the Act or the Administration Act. Second, there must be special circumstances (other than financial hardship alone) that make it desirable to waive. Third, it must be more appropriate to waive than to write off the debt or part of the debt.
Did Ms Tydd knowingly make a false statement or a false representation?
“Knowingly” is not defined in the Act.
The meaning of “knowingly” in this section was discussed in Re Clifford and June Callaghan and Secretary, Department of Social Security[1996] AATA 413; by Deputy President Forgie (at 445):
(48) There is nothing in s. 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 actual knowledge is 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 or omission.
The meaning of “knowingly” was considered in the Family Court in Prantage v Prantage (2013) 49 Fam LR 197; [2013] FamCAFC 105 in the context of section 117AB of the Family Law Act 1975 (Cth) which provides in effect that if the court is satisfied that a party has “knowingly” made a false allegation or statement in the proceedings, the Court must order that party to pay some or all of the costs of the other party or parties. The Full Family Court summarized the authorities and agreed with Cronin J’s discussion in Charles & Charles [2007] FamCA 276 that:
[24] “Knowingly” imports a serious subjective element into the question. In respect of many findings of fact as in this case, a trial judge determines which of two versions, sometimes diametrically opposed to one another, he or she believes on the balance of probabilities. Such a finding is not necessarily a statement that one version is patently untrue or that a person is lying; it may simply be that one version is more probable than another. For a court to be satisfied that a person knowingly made a false allegation or statement in the proceedings must mean that a court can be comfortable in finding that the person lied. It would not simply then be a balancing act between two versions. To be satisfied that a lie has been told and to so find requires a careful analysis of two things. The first is that the proffered version of fact is untrue but the second is that it is put knowing it to be untrue. A court must then be cautious about such a finding because of the mandatory consequence. The finding must be elevated above the “probable” level set out in s 140(1) of the Evidence Act 1995 to consider the matters contemplated in s 140(2) of that Act. That is, the Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] ALR 334 test applies.
…
[26] “Knowingly” is unequivocal. There can be no room for misunderstanding or doubt; objectively, the person making the statement cannot believe the statement to be true.[59]
[59] Charles & Charles [2007] FamCA 276.

The Respondent contends that Ms Tydd knowingly failed to declare her income to the Department because she knew what was in the Company statements and in her tax return.
Ms Tydd and her then accountant, Mr Wayne Martin, advised Centrelink on 22 July 2016 that the $35,000 was never paid by the Company to Ms Tydd.[60] Ms Tydd told the Tribunal that as she had not received that money, she did not believe it had to be declared to Centrelink.
[60] Exhibit 2, T Documents, T 24, page 289, Centrelink record.
It is understandable that Ms Tydd did not believe she had to declare it to Centrelink if she never received the money.
The Tribunal accepts that Ms Tydd believed that if she had not received the income there was nothing to declare.
In the circumstances the Tribunal finds that Ms Tydd did not knowingly or intentionally fail to comply with her obligations.
Are there Special Circumstances?
The Act does not define what constitutes “special circumstances”. However, subsection 1237AAD(b) of the Act clarifies that financial hardship alone will not constitute a special circumstance.
Decisions of the Federal Court make it clear that “special” denotes something different from the usual or ordinary.[61]
[61] Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541, at 545 per
Kiefel J; Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs v Jones (2012) 89 ATR 267; [2012] FCA 639, at [51]; Boscolo v Secretary, Dept of Social Security [1999] FCA 106; (1999) 90 FCR 531, at [18]; Barker J in Kazmierczak v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 1084, at [37].
French J (as he then was) said in Secretary, Department of Social Security v Hales (1998) 82 FCR 154, at 162:
The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special. But as a matter of grammar and ordinary logic, the exclusion of financial hardship alone as a special circumstance does not mandate its inclusion in the range of matters constituting such circumstances for the purpose of enlivening the Secretary's discretion. ... The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.
The AAT has also considered the phrase and held that the interpretation in Beadle and Director-General of Social Security (1984) 6 ALD 1, [1984] AATA 146, at [12] (i.e. that the circumstances must be unusual, uncommon or exceptional), applies to the Act.[62]
[62] See Hunnibell and Secretary, Department and Community Services [2004] AATA 992, at [19]; Papps
and Secretary, Department of Family and Community Services [2005] AATA 660, at [37].
The Respondent submits the Applicant's circumstances are not particularly unusual, uncommon or exceptional to the extent that justifies waiving the Commonwealth's right to recover the (remaining) debts.[63]
[63] Exhibit 3, Secretary’s Statement of Facts and Contentions, dated 19 June 2018, paragraphs 70-76.
In order for special circumstances to be found, Ms Tydd’s situation must be “unusual or uncommon”.
Ms Tydd told the Tribunal that special circumstance exists because:
(a)the financial records are not an accurate reflection of reality;
(b)she does not have the company anymore because it was not making any money;
(c)she has not done anything fraudulent;
(d)she declared everything “I was supposed to declare” and kept Centrelink informed of changes;
(e)“Something has happened” that she was totally unaware of;
(f)she did not really understand what she was reading when she signed off on the Company tax return and her personal tax return. She says it is the accountant who knows how to do those things;
(g)her health is not good; and
(h)there was nothing intentional on her part.
Ms Tydd’s financial circumstances alone cannot constitute a special circumstance. There are no medical reports before the Tribunal and nothing to indicate that because of
Ms Tydd’s medical condition, it impacted on her ability to keep Centrelink informed of her income.
The Tribunal has not been provided with enough information to ascertain what income was received from the Company and there is no corroborating evidence to explain the contents of the financial records. Those factors alone weigh against exercising the discretion to waive the NSA Debt.
The Tribunal does not consider that Ms Tydd’s circumstances, which largely revolve around not taking responsibility for the information in the financial records and tax returns, are sufficiently special or unusual to warrant the exercise of the discretion in section 1237AAD of the Act to waive the debt.
CONCLUSION
The decision under review is affirmed.

I certify that the preceding 102 (one hundred and two) paragraphs are a true copy of the reasons for the decision herein of Member D K Grigg

...............................[Sgd].........................................
Associate
Dated: 5 February 2019

Date of hearing: 21 January 2019

Date reserved: 23 January 2019

Applicant: By telephone

Solicitors for the Respondent: Rick McQuinlan, Senior Government Lawyer
Department of Human Services

of Family and Community Services [2003] AATA 729; L and Department of Social Security [1995] AATA 159;
Secretary, Department of Family and Community Services and Birgden [2003] AATA 67.

Indigenous Affairs [2010] AATA 115, at [17]; Biddlecombe and Secretary, Department of Families,
Housing, Community Services and Indigenous Affairs [2010] AATA 451, at [21]; Barnard and Secretary, Department of Social Services (Social services second review) [2016] AATA 436, at [47]; Scott v Secretary, Department of Social Security (1999) 57 ALD 627; [1999] FCA 1774, at [51], and on appeal Scott and Another v Secretary, Department of Social Security (2000) 65 ALD 79; [2000] FCA 1241 at [23] per Beaumont and French JJ.

[2019] AATA 89

5 February 2019

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Procedural Fairness

Statutory Construction

Appeal

Remedies

Date of hearing:	21 January 2019
Date reserved:	23 January 2019
Applicant:	By telephone
Solicitors for the Respondent:	Rick McQuinlan, Senior Government Lawyer Department of Human Services