"VAP" and Secretary, Department of Family and Community Services - [2003] AATA 1191

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [2003] AATA 1191

ADMINISTRATIVE APPEALS TRIBUNAL Nº V2003/516

GENERAL ADMINISTRATIVE DIVISION

Re: “VAP”
Applicant

And: SECRETARY TO THE
DEPARTMENT OF FAMILY AND
COMMUNITY SERVICES
Respondent

DECISION

Tribunal: M.J. Carstairs, Member

Date: 25 November 2003

Place: Melbourne

Decision:The Tribunal affirms the decision under review.

(sgd) M.J. Carstairs
Member

SOCIAL SECURITY - family tax benefit - overpayment - debt to Commonwealth - provision of revised estimates of income - effect on entitlement - whether administrative error

A New Tax System (Family Assistance (Administration) Act 1999 ss16, 21, 31A, 71, 97,

101, 102

Re Jones and Secretary, Department of Family and Community Services [2003] AATA 62

Re Beadle and Director‑General of Social Security (1984) 6 ALD 1

REASONS FOR DECISION

25 November 2003 M.J. Carstairs, Member

This is an application by “VAP” (the applicant) for review of a decision of the Social Security Appeals Tribunal (the SSAT) dated 24 April 2003. The SSAT affirmed a decision of a Centrelink delegate of the Secretary to the Department of Family and Community Services (the respondent), to raise and recover a debt of $900.60 being an overpayment of family tax benefit between 1 July 2001 and 30 June 2002.
At the hearing of this matter the applicant represented himself and Ms E. King, a Centrelink advocate, represented the respondent.
The Tribunal received into evidence the documents lodged under s37 of the Administrative Appeals Tribunal Act 1975 (T1-T29), together with Exhibit A1, an outline of the applicant’s submissions with attached letters from Centrelink tendered by the applicant, and Exhibits R1-R3 tendered by the respondent.

BACKGROUND

In the 2001/2002-tax year, the applicant received family tax benefit by instalments. The applicant is married, with three children: Megan (born 9 April 1986), Miranda (born 24 January 1988) and Darren (born 10 June 1989). Between 1 July 2001 and 9 October 2001 he was separated from his wife, and two of the children lived with him. Between 1 July 2001 and 12 October 2001 family tax benefit payments were calculated on the basis of the applicant’s estimated income of $35,000. From 12 October 2001, when the family reunited, family tax benefit was paid on the basis of estimated income (combined earnings) of $35,000 for the applicant and $20,000 for the applicant’s wife. From 28 February 2002, the family tax benefit payment was based on estimated income of $44,000 for the applicant and $26,000 for the applicant’s wife, a total of $70,000. The actual combined taxable income for the year 2001/2002, when assessed by the Australian Taxation Office, was $68,074, $44,515 being the applicant’s taxable income and $23,559.00 being his wife’s taxable income.
On 9 November 2002 Centrelink decided that, for the tax year 2001/2002, the applicant had been overpaid family tax benefit. On 11 December 2002 a Centrelink authorised review officer affirmed the decision that the debt should be recovered. Following the decision of the SSAT, the applicant applied to the Tribunal on 21 May 2003 for review of the decision.
The issues for the Tribunal are whether there was an overpayment between July 2001 and June 2002, and if so should it be recovered.

EVIDENCE

The applicant said that he now accepted that the Centrelink's calculations of the amount of the debt were correct. He said that the respondent had recently supplied answers (Exhibits R2 and R3) to a number of questions that he had asked in a letter dated 20 February 2002 (T23); and while some of the answers were contradictory, he was reasonably satisfied with the responses and had a better understanding of the calculation of the overpayment. He also said that, while the factual information set out in the respondent’s statement of facts and contentions (Exhibit R1) was, in the main, correct, the document incorrectly stated that estimates of combined income were less than the total income as assessed by the Australia Taxation Office.
The applicant said that he went to Centrelink in February 2002 and provided the revised estimates of income. He said that he was not told on that day that he would have an overpayment, even though Centrelink must have known that he would have a debt. If the same circumstances occurred now, he said that a new tool, called the Interim Adjusted Taxable Income Tool (the ATI tool), enables Centrelink to make the adjustment to payments in the remaining part of the financial year. The ATI tool takes into account that a person has been overpaid in the earlier part of the financial year. Referring to the letter by Ms C. Clarke, Manager, Family Assistance Office, Area South East, dated 9 October 2003 (Exhibit A1, attachment 2), he said that it was an error on Centrelink’s part not to tell him about the debt. He said that, if told, he would have asked Centrelink to cancel future payments.
A Statement of Financial Circumstances dated 23 April 2003 (T25) set out the applicant’s income as approximately $1350 gross per fortnight. This figure does not include the family tax benefit received on behalf of two of the children, or youth allowance received by his oldest child. The outgoings totalled $1367 (excluding an estimated $3000 for home improvements).
On the question of financial hardship, the applicant said that his income varies week-to-week, because he gets additional work above his four hours a day part-time duties with Australia Post. He said that he anticipates his income this year will be about $30,000. He receives parenting payment, the fortnightly amount of which varies according to his income from employment. He receives maximum family tax benefit, as a result of receiving parenting payment (single). He does not require his oldest child to pay board. He said that Centrelink had been withholding $40 per fortnight from his parenting payment for the debt, but this had been reduced to $20 per fortnight in more recent months. He said that his immediate commitments are that he must repay $700 to AGC (a finance company) by December. He owes a further $4000 to AGC but has 16 months to repay, at a rate of $200‑$300 per fortnight. The applicant said he has a MasterCard debt of $1500‑$1600.
The applicant said that the children are healthy but all require dental, and possibly orthodontic, treatment, which he expects to be costly. One daughter has commenced dental treatment and this has cost $800 so far. The family does not have private medical cover.

CONSIDERATION OF THE ISSUES

A New Tax System (Family Assistance) (Administration) Act 1999 (the Act) deals with the payment of family tax benefit. The Act provides for family tax benefit to be calculated out taking into account the adjusted taxable income of the claimant and his or her partner. A person may either claim family tax benefit on an ongoing basis, as in the applicant’s case, or wait until the end of a financial year for it to be paid as a lump sum. During the relevant period the applicant provided new estimates of income, and advised Centrelink about changes of family circumstances. This information was used to revise his entitlement to ongoing payments.
The Tribunal was reasonably satisfied that there was a debt in the amount of $900.60 because of the operation of s31A of the Act, read with s71. Section 71 provides that, if the amount that a person receives is greater than the amount of assistance that should have been paid to the person under the family assistance law, then the difference between the received amount and the correct amount is a debt. The Tribunal notes that the applicant did not dispute that the calculation of the debt was correct under the legislation.
In respect of recovery of the debt, non-recovery of certain family assistance debts is dealt with in Part IV of the Act. Section 101 provides:
101 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.
A debt may be waived on the basis of sole administrative error made by the Commonwealth only if …the person would suffer severe financial hardship if it were not waived (s97 of the Act).
The applicant submitted that it was possible, and correct practice, for Centrelink to identify whether a customer would be overpaid when a new estimate was provided, as confirmed by the letters of Ms Clarke dated 29 September 2003 and 9 October 2003. He submitted that there was evidence to confirm that a manual determination of the overpayment could have been made in February 2002. He submitted Centrelink officers were advised to warn customers that they might have an overpayment due to the provision of an increased estimate. He also submitted that Centrelink's failure to do so amounted to administrative error, and a breach of duty of care.
The applicant submitted that he kept Centrelink fully informed of personal and financial information. He said it was a simple matter for Centrelink to identify those who would incur a reconciliation debt, and this was now acknowledged in the letters from Ms Clarke. He said that had he been advised, as he should have been in February 2002, he would have adjusted his income estimate to avoid the debt even if this resulted in payments ceasing. He said that they were then a two-income family; they could have managed the overpayment. The timing of the recovery was the major factor in his financial hardship. By the time he was told of the debt in November 2002, his family and financial situation had changed significantly. He said that he now has to support three children as a sole parent, and works reduced hours, which has resulted in significantly reduced income to support the family.
The applicant said that his estimate of income, made in February 2002, was incorrect by only 1.1% in regard to his actual income. The combined estimate was $70,000, whereas the total taxable income proved to be less ($68,074). He said it was anomalous that the combined estimated taxable income was above the actual taxable income by 2.8%, but that the debt raised by Centrelink was equivalent to 27% of the family tax benefit.
In summary, the applicant submitted that he was careful to keep Centrelink fully advised, he trusted Centrelink to make the correct calculations in a system that is complex for individuals to understand, and he received the payments in good faith.
Ms King submitted that the debt should be recovered. She acknowledged the applicant’s submission that Centrelink made an administrative error in not advising him in February 2002 that a debt would occur. However, she said that it is not possible to ascertain if a person has been underpaid or overpaid until after the end of the tax year, when the actual income earned in that year is ascertained. Therefore, she said, there was no administrative error, even taking into account the introduction of the ATI tool in 2002 to avoid the problem. Ms King referred the Tribunal to the decision in Re Jones and Secretary, Department of Family and Community Services [2003] AATA 62. She submitted further that any error occurring was not solely Centrelink error and that the applicant's financial circumstances are not severe when compared with those people who are solely reliant on social security. His income was expected to be about $30,000, and she said the legislation provides for recovery at a reasonable rate.
Ms King submitted that special circumstances, in their totality, must be abnormal, unusual or uncommon to justify the waiver of recovery of the whole or part of a debt. She further submitted that, as there are specific waiver provisions for administrative error, it would not be appropriate to apply the discretion for special circumstances to circumstances that rely on the occurrence of administrative error.
The Tribunal reached its decision taking into account the oral and documentary material and submissions of the parties.
The Tribunal noted that the respondent acknowledged that Centrelink was in error in not following usual practice in giving the applicant information in February 2002 that a debt might be incurred. In the Tribunal’s view, this failure does not require as its remedy either that a debt should not be raised, or not recovered. Under the legislation a debt occurs as a result of the estimated income overall for the whole tax year proving to be inaccurate. This is the effect of s71 of the Act.The Tribunal had some doubts that the failure to advise of the possibility of future action to raise a debt would amount to administrative error in regard to that debt, as s97 requires. However the Tribunal was satisfied that even if this was an error of the kind contemplated by the section, the debt was not solely attributable to the error. The changes from the earlier estimates of income, which are estimates in respect of the whole tax year, continued to contribute to the outcome that a debt would result.
The family’s financial circumstances have changed and they are no longer a two-income household. However, the applicant is in paid employment and earning well above the maximum payments for those on social security payments alone. The term severe financial hardship must be seen in the context of legislation providing basic income support. With income of $30,000, in addition to entitlements under the Act, the household receipts appear to be slightly in excess of outgoings. The Tribunal was satisfied that s97 of the Act cannot be applied, as the applicant is not in severe financial hardship.
With respect to waiver of all or part of the debts under s101 of the Act, the respondent must satisfy s101(b) and s101(c) of the Act. In relation to s101(b) concerning special circumstances, Federal Court and Tribunal decisions establish that special circumstances are circumstances having a particular quality of unusualness. In Re Beadle and Director‑General of Social Security (1984) 6 ALD 1 this was described as circumstances that are unusual, uncommon or exceptional. The Tribunal accepts that financial hardship is present. The family has had to make adjustments because of a substantial reduction in income, when this became a single parent family. Other circumstances to be taken into account include that since April 2002 Centrelink has made improvements for people such as the applicant to avoid and manage debts of this kind. The Tribunal agrees with the applicant that he would have been able to manage the repayment of the debt if he had the options now available because of the ATI tool. However, as the Tribunal stated in Re Jones, the later provision of this tool is not, of itself, a justification for an exercise of the discretion as to special circumstances, where the debt has already been incurred. As the Tribunal also said in Re Jones, the changed procedure is intended to prevent overpayments occurring, not to avoid recovery of them when they have occurred.
Taken alone or together, the circumstances do not have the necessary degree of unusualness to warrant the exercise of the discretion to waive the debt. The responsibility that the applicant alone now bears for the children is not an unusual circumstance. The Tribunal notes that, since the overpayment was incurred, the applicant‘s older daughter has been receiving youth allowance, and this must reduce some of the costs the applicant would otherwise incur on her behalf. The family is in reasonable health, despite concerns about future outlays for dental work. The applicant is repaying the debt on a reduced rate of $20 a fortnight, and in view of the other debts that must be paid more immediately, this recovery rate should continue until the debt is recovered in full. For these reasons, the Tribunal decides that the sum of $900.60 in family tax benefit paid to the applicant between 1 July 2001 and 30 June 2002 is a debt recoverable by the Commonwealth, and should be recovered at the rate of $20 a fortnight.

DECISION

The Tribunal affirms the decision under review.

I certify that the twenty‑seven [27] preceding paragraphs are a true copy of the reasons for the decision of:

M.J. Carstairs, Member

(sgd) Catherine Thomas
Clerk

Date of hearing:  10 November 2003
Date of decision:  25 November 2003
Solicitor for applicant:                  Nil — IN PERSON
Advocate for respondent:            Ms E. King, Centrelink